We are an established contractor in Hong Kong engaged in civil and electrical cable engineering and solar PV system works. Our civil engineering works specialise in site formation works and road and drainage works, and our electrical cable engineering works specialise in cable trenching, laying and jointing works. For solar PV system works, we specialise in design, installation and maintenance works of solar PV systems. To a lesser extent, during the Track Record Period, we leased machinery and traded construction materials to contractors and subcontractors on an ad hoc basis in a limited number of projects (mainly Project No. #01) in which we participated in.
Our site formation works generally include earthworks, excavation and installation of steel structures. Our road and drainage works mainly include construction and modification of roads, carriageway and pavement, construction of covered walkways, renovation of subways and footbridges, provision of universal accessibility facilities at footbridges, elevated walkways and subways, construction of drainage systems, manholes, cable trenches and installation of water mains and sewerage pipes.
Our electrical cable engineering works generally include cable trenching, laying and jointing, and involve excavation, reinstatement and miscellaneous construction (such as concrete draw) works, traffic impact assessment as well as emergency and cable fault repair. According to the Industry Report, our Group is the largest power cabling and civil pipeline installation subcontractor in Hong Kong in 2023 with the market share of approximately 13.6% based on our revenue for FY2023/24. Our Directors recognised the growing importance of renewable energy and sustainable development which are two of the main drivers for Hong Kong’s future development.
Starting from 2019 and during the Track Record Period, our Group also performed design, installation and maintenance works of solar PV systems under our business segment of solar PV systems.
During the Track Record Period, we participated in certain major infrastructure projects in Hong Kong for each of our segments. For example:
(i) in respect of our site formation works, we were one of the subcontractors participating in the infrastructure project at the third runway of the Hong Kong International Airport (i.e. the Third Runway Projects);
(ii) in respect of our road and drainage works, we were the main contractor of a Government department for a village sewerage project at Mui Wo with a contract sum of approximately HK$99.1 million; and
(iii) in respect of our electrical cable engineering works, we are directly contracted by the CLP Group, being a group of companies providing electricity to more than 80% of the Hong Kong’s population, to provide zonal cable trenching, laying and jointing works as well as emergency and cable fault repair under the Master Agreement A in which we covered the Sham Shui Po and Wong Tai Sin zones. We are also a subcontractor of Kum Shing Construction, which is one of the main contractors of the CLP Group, to provide zonal cable trenching, laying and jointing works as well as emergency and cable fault repair under the Master Agreement B in which we cover the Tsuen Wan zone. For the salient terms of the Master Agreement A and the Master Agreement B, please refer to the paragraph headed “Business — Our customers — Master Agreement A and Master Agreement B for electrical cable engineering works” in this document. We are the only direct subcontractor of CLPe Solutions Limited and Kum Shing Construction (both as main contractor) for the scope of works set out in the Master Agreement A and the Master Agreement B (i.e. cable trenching, laying and jointing works as well as emergency and cable fault repair), respectively.
During the Track Record Period, the Third Runway Projects have been a main driver of our business and financial performance. For instance, the Third Runway Projects in aggregate contributed service revenue of approximately HK$254.6 million, HK$92.7 million and HK$241.2 million for FY2021/22, FY2022/23 and FY2023/24, respectively, representing approximately 96.8%, 80.9% and 80.0% of our service revenue from site formation works and approximately 48.9%, 25.7% and 45.9% of our total revenue for the corresponding financial years.
Notwithstanding it is reported that the third runway of the Hong Kong International Airport is scheduled for completion in 2024, the scope of our Group’s involvement in the Third Runway Projects covers more than just the runway itself. This includes, among others, the passenger terminal building, airport apron, and underground works for cable ducting systems, fire service water plumbing, sewerage, oil separation, and seawater cooling discharge systems which require footings and steel structure works to be performed by our Group which are still under construction. Currently, our Third Runway Projects are expected to complete by mid-2025.
In May 2024, our Group was first included on the List of Pre-Qualified Tenderers for Civil Engineering Works of Hong Kong International Airport, enabling our Group to bid for tender projects as main contractors. It is AAHK’s policy that all projects must go through a robust and prudent procurement process and adoption of the most appropriate procurement strategies and methods. Such procurement methods may include competitive tendering or limited tendering with the objective to identify the best fit suppliers and obtain the best value of money. To the best knowledge of our Directors, (i) the invitation to tender of all AAHK’s projects would be issued and posted on AAHK’s website and be accessible by the public, save for minor civil engineering works with value not exceeding HK$50 million; and (ii) the invitation to tender for AAHK’s minor civil engineering works with value not exceeding HK$50 million would only be sent to or be available for downloading at the ePROS (which is an e-tendering system maintained by AAHK to automate the procurement and tendering process) for contractors which have been included on the List of Pre-Qualified Tenderers for Civil Engineering Works. Since the said inclusion, our Group has received three invitations from AAHK to submit tenders for works involving cabling infrastructure for enterprise 5G enhancement, enabling works for airside access of transit mail centre, and modification works in North and South Aircraft Recovery Equipment Stores, respectively, in August 2024. As of 21 September 2024, (i) our Group has already submitted tender documents on 9 September 2024 via ePROS for one of the tenders; and (ii) the submission period of the other two tenders has not yet lapsed and our Group is in the process of preparing the tender documents for submission. Hence, upon the expected completion of the Third Runway Projects in mid-2025, our Group will also be eligible to submit tenders for various maintenance and upkeep works at the Hong Kong International Airport. In fact, according to AAHK’s Annual Report 2023/24, the expenses related to repairs and maintenance, as well as the costs of outsourcing business operations to third-party contractors was approximately HK$2.33 billion, accounting for approximately 28.1% of AAHK’s total operating expenses in FY2023/24. The said sum has increased by appropriately 19.8% as compared to that of the previous financial year, which shows the trend of AAHK to increase its investment in repairs and maintenance of the Hong Kong International Airport in recent years. In addition, our Group is currently in advanced or final stage of negotiation for some projects for which we have submitted tenders (the details of which are set out in the paragraph headed “Future Plans and Use of Proceeds — Use of proceeds” in this document). Having considered the above, our Directors consider that the completion of the Third Runway Projects by mid-2025 will not have a material adverse impact on our Group’s business prospects. Furthermore, as mentioned previously, given that our Group is on the List of Pre-Qualified Tenderers for Civil Engineering Works of Hong Kong International Airport, upon completion of the Third Runway Projects, our Group would be able to free up our capacity (in terms of human resources, working capital, as well as our machinery and equipment, etc.). This would allow us to bid for tender projects for other civil engineering works at the Hong Kong International Airport going forward.
Source: Wing Lee Development (09639) Prospectus (IPO Date : 2024/09/27) |