New stock offering | Quanfeng Holdings will start IPO today, and is expected to be listed on December 30th.

Futu news on December 17th, this Friday$CHERVON (02285.HK)$Announcement: The company will conduct a public offering from December 17th to 22nd, intending to issue 71.916 million shares, including 7.1916 million shares for public offering and 64.7244 million shares for international offering at an issue price of 37.6-43.6 Hong Kong dollars per share, in lots of 100 shares, with an expected listing date of December 30th.

Quanfeng Holdings is a global supplier of electric tools and outdoor power equipment ("OPE"), offering a full range of products under well-known brand portfolios, custom-made to meet the diverse needs of end users worldwide.

The target customers for the company's power tools are industrial/professional and consumer end users, while the target customers for OPE products are high-end and mass market end users. Quanfeng Holdings currently owns five distinctive and widely recognized brands including EGO, FLEX, SKIL, Dayou, and Xiaoqiang, covering major regions and niche markets.

According to a Frost & Sullivan report, based on the 2020 revenue, the company ranks 13th in the global power tool and OPE market, accounting for approximately 1.9% market share. During the same period, its proprietary product EGO ranked third in the global electric OPE market.

In terms of financial position, the company experienced significant revenue growth and notable improvement in profitability during the past years. From 2018 to 2020, the company achieved revenues of 0.691 billion USD, 0.844 billion USD, and 1.201 billion USD, with a compound annual growth rate of 31.9%; recorded net profits of -13.457 million USD, 36.082 million USD, and 48.388 million USD; with respective gross margins of 25.4%, 30.3%, and 30.7% during the same period.

In the first half of 2021, the company recorded revenues of 0.869 billion USD, net income of 91.239 million USD, and a gross margin of 28.9%, all showing significant improvements compared to the same period last year.

In terms of industry, according to a Frost & Sullivan report, the global power tool market grew at a compound annual growth rate of 6.1%, increasing from 30.9 billion USD in 2016 to 39.2 billion USD in 2020 (based on revenue), and is expected to further grow at a compound annual growth rate of 5.5% to reach 51.3 billion USD by 2025.

Power tools can be divided into two segments based on power sources (namely electric tools and other power tools). In terms of revenue, electric tools represent a larger segment of the market and are expected to grow at a compound annual growth rate of 5.9% to reach 38.6 billion USD by 2025.

Over the same period, the revenue of the global OPE market increased from $20.1 billion in 2016 to $25 billion in 2020 at a compound annual growth rate of 5.6%, and the revenue is expected to further increase to $32.4 billion in 2025 at a compound annual growth rate of 5.3%.

Several cornerstone investors have agreed to subscribe for the available shares at the offer price, with a total amount of 0.21 billion US dollars, including Hu Li Hong Kong, Jing Lin, Prime Capital Funds, 3W Fund, Ivy, and Ms. Luo Jinhong.

Regarding the use of funds, based on the median price range of 40.6 Hong Kong dollars, the net proceeds expected to be received from the global offering are approximately 2.75 billion Hong Kong dollars (after deduction of underwriting commissions and other estimated expenses related to the global offering). The company intends to use the net proceeds from the sale of shares for the following purposes: approximately 66.5% will be used to expand and upgrade the company's production base in China; approximately 9% will be used for product research and development; approximately 7% will be used to improve sales and distribution channels; approximately 7.5% will be used to repay interest-bearing bank loans (these loans are generally used as working capital); approximately 10% will be used as working capital and for other general corporate purposes.

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