New stock announcement | Rong Li Construction (09639) launches IPO today, introducing Hillhouse Capital and COSCO Shipping Group (01283) and other institutional investors to subscribe for HK$35 million worth of shares.

Rongli Construction (09639) will be listed from September 27, 2024 to October 4, 2024, intending to globally issue 250 million shares, with 10% for public offering and 90% for allocation, with an additional 15% over-allotment option. The offering price per share is between HK$0.57 and HK$0.73, with a trading lot size of 5000 shares. It is expected that the shares will begin trading on the Stock Exchange on October 9, 2024 (Wednesday). According to the announcement, the company has entered into cornerstone investment agreements with Sany Hong Kong, High Sun Group (01283), and Sanfeng, with cornerstone investors agreeing to subscribe for a total amount of HK$35 million worth of shares at the offering price. Assuming that the over-allotment option is not exercised and calculating based on the offering price of HK$0.65 per share, the net proceeds from the global offering are estimated to be approximately HK$130.5 million. Around 45% will be used for acquiring more power machinery and equipment, approximately 35% for preliminary costs of new projects, about 5% for new employee recruitment, around 5% for purchasing Safety Smart Site System (4S) and Enterprise Resource Planning System, and approximately 10% will be retained as general operating funds. The company is a well-established Hong Kong contractor specializing in civil and cable engineering as well as CECEP Solar Energy photovoltaic system projects. Their civil engineering focuses on land leveling work and road and drainage projects, while their cable engineering specializes in cable trenching, laying, and connection projects. In terms of CECEP Solar Energy photovoltaic system projects, the company concentrates on the design, installation, and maintenance of these systems. Additionally, in previous periods, the company temporarily leased machinery and bought construction materials from contractors and subcontractors for a few projects, mainly the #01 project. During the previous reporting periods, the Third Runway Project has been the main driver of the company's business and financial performance. For example, in the 2021/22, 2022/23, and 2023/24 fiscal years, the Third Runway Project contributed approximately HK$255 million, HK$92.7 million, and HK$241 million in service revenue, accounting for around 96.8%, 80.9%, and 80.0% of the company's land leveling engineering service revenue in the respective fiscal years, and approximately 48.9%, 25.7%, and 45.9% of the company's total revenue.