Pagoda Group (02411) will issue an IPO from December 29, 2022 to January 9, 2023. It intends to issue 78.9475 million shares globally, of which Hong Kong sales account for about 10% and international sales account for about 90%. The offering price will not exceed HK$6.20 per offer share, and is expected to be no less than HK$5.00 per offer share; 500 shares per lot, and it is expected that the shares will be traded on the Hong Kong Stock Exchange at 9:00 a.m. on January 16, 2023 (Monday).
The group is the largest fruit retail operator in China. According to Frost & Sullivan, the Group is the largest fruit retailer in China in terms of fruit retail sales in 2021, accounting for 1.0% of the total market share in China, while the five major players together accounted for 3.6% of the total market share. At the same time, in terms of fruit retail sales, the Group also ranks first among all fruit retail operators in China. The group has the largest distribution network in the fruit industry in China.
The group mainly sells all kinds of fruits. Currently, the group offers more than 60 types of fruits. In addition, the Group also sells fruit products such as dried fruit and juice. The Group has also started to distribute other major fresh products, including vegetables, meat and seafood, grain, oil and dairy products, through mobile apps and WeChat mini-programs.
The group’s revenue decreased by 1.4% from RMB 8.976 billion in 2019 to RMB 8.854 billion in 2020, while revenue in 2021 increased by 16.2% to RMB 10.289 billion. Revenue increased by 7.0% from RMB 5.525 billion for the six months ended June 30, 2021 to RMB 5.915 billion for the same period in 2022. The group’s gross profit decreased by 7.9% from RMB 876 million in 2019 to RMB 807 million in 2020, while gross profit in 2021 increased by 43.2% to RMB 1.156 billion. The Group’s gross profit margins in 2019, 2020 and 2021 will be 9.8%, 9.1% and 11.2%, respectively. Gross profit increased by 12.7% from RMB 601 million for the six months ended June 30, 2021 to RMB 677 million for the same period in 2022. For the six months ended June 30, 2021 and 2022, the gross profit margins will be 10.9% and 11.5%, respectively.
Assuming that the offer price is HK$5.60 per offer share, approximately 45.0% of the Group’s estimated net proceeds, or approximately HK$165 million, will be used to improve and strengthen the Group’s operations and supply chain system. 25.0%, or approximately HK$91.5 million, will be used to upgrade and improve the Group’s core IT systems and infrastructure (mainly middle office), and approximately 25.0% of the estimated net proceeds, or approximately HK$91.5 million, will be used for repayment About 5.0% of the estimated net proceeds, or approximately HK$18.3 million, will be used for the group’s working capital and general corporate purposes for part of the group’s interest-bearing bank borrowings.
In addition, the company has entered into a cornerstone investment agreement with Hong Kong Baijiada, Nandao Sen and Ye Rongju. Accordingly, cornerstone investors agreed to subscribe for the relevant number of Offer Shares (adjusted downwards to the nearest full board lot size of 500 H shares per board lot) which can be purchased at a total of approximately HK$150 million.
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