Highlights

• A Hong Kong-based building protection solution provider
• Providing solutions which integrate the provision of building protection works with a focus on waterproofing works and the supply of building protection products
• Ranked second in the building protection work market in Hong Kong with a market share of approximately 3.0% in terms of revenue in FY2019, according to a Frost & Sullivan Report
• A distributor of nine brands covering more than 400 building protection products, as at 22 March 2020 (the Latest Practicable Date)
• Supplying its own-brand "DP ChemTech" and "DP" products since 2011

Financial Highlights

HONG KONG, CHINA - Media OutReach - 31 March 2020 - Sunray Engineering Group Limited ("Sunray Engineering Group", together with its subsidiaries, the "Group"; stock code: 8616), a Hong Kong-based building protection solution provider, announces the details of its plan to list on GEM of The Stock Exchange of Hong Kong Limited ("SEHK") today.

A total of 250,000,000 shares will be offered under the Share Offer, of which 225,000,000 Shares (subject to reallocation and the Offer Size Adjustment Option), representing 90% of the total number of Offer Shares under the Share Offer, will be offered by way of Placing; while the remaining 25,000,000 Shares (subject to re-allocation), representing 10% of the total number of Offer Shares under the Share Offer, will be offered under the Public Offer. The Offer Price per Offer Share is expected to be not less than HK$0.24 and not more than HK$0.28 (subject to a Downward Offer Price Adjustment). The Public Offer will commence at 9:00 a.m. on 31 March 2020 (Tuesday) and close at 12:00 noon on 7 April 2020 (Tuesday). The final offer price and the allotment results are expected to be announced on 22 April 2020 (Wednesday). Dealings in the shares of Sunray Engineering Group on GEM of the SEHK are expected to commence on 23 April 2020 (Thursday).

Assuming an Offer Price of HK$0.26 per Offer Share (being the midpoint of the Offer Price range), the aggregated net proceeds from the Share Offer, after deducting related expenses, will be approximately HK$29.0 million. Sunray Engineering Group intends to use these net proceeds for the following purposes: 1) approximately 9.8% will be used for acquiring additional machinery and equipment for building protection works; 2) approximately 29.1% will be used for expanding its workforce; 3) approximately 31.0% will be used for strengthening its financial position for payment of upfront cost; and 4) 30.1% will be used for expanding its building protection product mix and continuing to develop its own-brand "DP ChemTech" and "DP" products.

Ample Capital Limited is the Sole Sponsor. Alpha Financial Group Limited and Lego Securities Limited are the Joint Global Coordinators. Alpha Financial Group Limited, Lego Securities Limited and Enhanced Securities Limited are the Joint Bookrunners. Alpha Financial Group Limited, Lego Securities Limited, Enhanced Securities Limited, AFG Securities Limited, All EverGreen Securities Limited, Brilliant Norton Securities Company Limited, China-Hong Kong Link Securities Company Limited, CIS Securities Asset Management Limited, Grand Partners Securities Limited, Lee Go Securities Limited and Orient Securities Limited are the Joint Lead Managers.

Industry Overview

According to a Frost & Sullivan Report, Hong Kong's gross value in construction industry embraced stable growth from approximately HK$278.2 billion in 2013 to approximately HK$470.2 billion in 2019 at a CAGR of approximately 9.1%, which could be attributed to many mega infrastructure construction projects in Hong Kong. By the end of 2023, it is estimated that growth will remain stable at a CAGR of approximately 4.2% driven by strong demand for housing. The gross value of construction work in Macau has reached HK$15.2 billion in 2019 and it is estimated that the growth will remain stable at a CAGR of approximately 4.6% driven by demand derived from the tourism and related sector.

The market size of building protection work in Hong Kong is projected to reach HK$4,323.0 million by 2023, at a CAGR of 4.4% between 2019 and 2023. The growing demand from major applications such as waterproofing on external wall and roof is expected to drive the demand for building protection work market. The growing construction sector is a major driving factor for the building protection work market. For building protection products, it is estimated that the market size is expected to grow at a CAGR of 4.2% during the future period from 2019 to 2023, reaching HK$2,094.6 million in 2023.

Business Overview

The Group is a Hong Kong-based building protection solution provider and its solutions integrate the provision of building protection works with a focus on waterproofing works; and the supply of building protection products. According to the Frost & Sullivan Report, it ranked second in the building protection work market in Hong Kong with a market share of approximately 3.0% in terms of revenue in FY2019.

The Group's building protection works were carried out with the building protection products sourced and procured by it, and in various types of buildings in both public and private sectors such as residential buildings, commercial buildings and community facilities. The building protection products supplied by the Group can be broadly categorised into waterproofing products, tiling products and flooring and other products. As at 22 March 2020 (the Latest Practicable Date), it was the distributor of nine brands covering more than 400 building protection products, which were sourced from Independent Third Party brand owners and manufacturers from Germany, Switzerland and the United States. Since 2011, the Group also supplied its own-brand "DP ChemTech" and "DP" products, which are sourced from selected Independent Third Party suppliers from different jurisdictions such as PRC, Taiwan and Singapore.

Competitive Strengths

1)       A synergistic business model integrating the provision of building protection works and the supply of building protection products, which complement each other

The Group believes that its expansion into the distribution and supply of building protection products has created a synergy effect on its business. On one hand, it boosted the sale of its building protection products whereby it can bargain for better terms with the brand owners or manufacturers of the products in terms of purchase price, duration of its distribution right, range of products covered, and geographical coverage of its distribution right etc. of the products. On the other hand, the Group is also in a better position to select the appropriate type of products to be applied in its building protection works projects, and more accurately assess their cost and the quantity required, which would facilitate the Group in its preparation of realistic and competitive quotation.

2)       An established operating history and proven track record as a provider of building protection solutions, which enables the Group to maintain a stable relationship with its customers

The Group has over 30 years of operating history in the building protection industry in Hong Kong. During the Track Record Period, it completed over 80 building protection works projects; and on the other hand, supplied its own-brand building protection products and acted as the distributor of over 400 building protection products in nine brands, which together have enabled it to provide integrated building protection solutions to its customers and to maintain a stable relationship with its customers.

3)       Offering an extensive brand portfolio of building protection products and maintaining a stable relationship with its building protection products suppliers and subcontractors

The extensive brand portfolio of building protection products enables the Group to maintain its position as a provider of building protection products in Hong Kong and Macau. It also gives the Group a greater flexibility in selecting suitable building protection products for undertaking building protection works in different buildings and developments.

4)       A dedicated management team with extensive industry experience

The Group's senior management team members generally have over 20 years of experience in the building protection industry or construction industry. Its management team's extensive industry experience and knowledge will enable the Group to formulate competitive quotations, manage and implement its projects effectively, and control the costs of its projects.

BUSINESS STRATEGIES

1)    Acquiring additional machinery and equipment for carrying out building protection works to cope with the Group's business expansion

Having its own machinery and equipment enhances the Group's competitive strength over other building protection work providers to the extent that, (i) it allows the Group to have more flexibility in allocating its resources in undertaking building protection work projects of varying scale and duration and cover different scale and scope of building protection works; and (ii) there is a higher chance that its quotations would be accepted by potential customers as the Group can ensure stable and sufficient machinery to carry out the works effectively and efficiently.

2)    Expanding the Group's workforce

In granting a contract, customer will assess, among other things, the availability of the Group's manpower resources. Hence, to increase the Group's chance in winning a contract by quotation, it is necessary for it to enhance its competitiveness by expanding its workforce.

3)    Strengthening its financial position to pay for the upfront cost of its projects

To commence a new project and in the course of carrying out the project, the Group generally has to incur substantial upfront costs in the early stage and working capital during the course of implementation of the project before such costs can be recovered from its customers after more than approximately three months. To ensure that the Group has sufficient cash to pay the upfront cost, it will review the allocation of the net proceeds for payment of upfront costs for its projects regularly.

4)    Expanding the Group's building protection product mix and continuing to develop its own-brand "DP ChemTech" and "DP" products

The Group plans to solidify its relationship with existing suppliers of building protection products, identify and introduce new brands and new products from its existing suppliers and new suppliers of building protection products. It also plans to enhance the market recognition of its own-brand "DP ChemTech" and "DP" products.

MEASURES ON COVID-19 OUTBREAK

The Group believes that the occurrence of the outbreak of COVID-19 has not resulted in any material adverse impact on the business operation and financial performance of the Group, as at 22 March 2020 (the Latest Practicable Date). There is no loss or cancellation of its contracts or purchase orders. None of the Group's customers have, or have expressed their intention to delay, suspend or terminate the Group's existing building protection projects or their purchase orders for the Group's building protection products, or reduce their demand of the Group's services and products. The Group has not experienced any instance of material labour shortage or suspension of works of its subcontractors in its building protection works projects.

To avoid shortage in supply of building protection products due to temporary closure of its suppliers' production facilities, transportation restrictions or disruption of the supply chain of building protection products, the Group would obtain quotations from different suppliers and subcontractors and retain the quotations of the other suppliers/subcontractors for back-up purpose. As at 31 January 2020, the cash balance of the Group was approximately HK$49.7 million, and its Directors believe that the Group's cash balance will be able to support the monthly cash demands for not less than 12 months assuming there is no redundant or pay cut to current staff.

About the Group

SunrayEngineering Group Limited is a Hong Kong-based building protection solutionprovider and its solutions integrate the provision of building protection workswith a focus on waterproofing works and the supply of building protectionproducts. According to the Frost & Sullivan Report, the Group ranked secondin the building protection work market in Hong Kong with a market share ofapproximately 3.0% in terms of revenue in FY2019.

For FY2018 and FY2019, theGroup's overall revenue increased by approximately 25.1% from approximatelyHK$153.2 million to HK$191.7 million. As at 22 March 2020 (the LatestPracticable Date), the Group had undertaken 287 building protection worksprojects in Hong Kong, and the total original contract sum of these projectsamounted to approximately HK$657.5 million.