Upcoming IPO Analysis | Mergers and Acquisitions Boosting Growth and Cash Outflow The Dual Nature of Ever Glory's High Growth Story

On August 10, Singapore's electromechanical engineering service provider Ever Glory United Holdings Limited (hereinafter referred to as Ever Glory) officially submitted its listing application to the Hong Kong Stock Exchange, planning to launch a dual primary listing on the Hong Kong stock market. ICBC International is the sole sponsor. Although the company is already listed on the main board of the Singapore Exchange, this "A+H" (Singapore+Hong Kong) dual layout aims primarily to broaden its financing channels and optimize its shareholder structure. From a financial perspective, the company's revenue and profit show a sharp upward trend. As of the time of filing, its order book had surpassed SGD 1 billion, ranking it among the top in the industry and possessing high barriers to entry. However, beneath the impressive scale data, the inherent nature of its project-based business model, its reliance on acquisition-driven non-organic growth paths, and the potential tightening of its operational cash flow chain constitute risks that cannot be ignored. The quality of its growth and financial resilience remain to be further validated. The "apparent prosperity" driven by external acquisitions and the braking of organic growth In recent years, Ever Glory's financial data has shown significant scale increases. From fiscal year 2023 to 2025, its revenue rose from SGD 47.478 million to SGD 122 million, with annual profits increasing from SGD 6.831 million to SGD 20.122 million, resulting in compound annual growth rates of 60.0% and 71.6% for revenue and net profit, respectively; in the first half of 2026, revenue recorded a year-on-year increase of over 200%. However, this steep performance curve does not stem from organic growth in core business, but rather from a heavy dependence on the consolidation effects driven by external acquisitions, raising doubts about its organic expansion momentum. The prospectus reveals that the company completed its acquisitions of Fire-Guard and Guthrie Engineering in February 2024 and July 2025 for total consideration of SGD 4.2 million and SGD 46.034 million, respectively. Guthrie Engineering, being a much larger acquisition than Fire-Guard, will see its operating data fully consolidated from the second half of 2025, directly boosting the revenue and profit base for that period and subsequent accounting cycles. Excluding the contributions from these non-recurring acquisitions, the compound growth rate of revenue from the company's original business lines will be significantly revised downward. The narrative of "explosive growth" largely rests on financial consolidation from capital operations rather than improvements in technological barriers or natural market share expansion. Moreover, the risk of imbalance in the company's revenue structure is also intensifying. The revenue proportion of its core electrical engineering (ELECT) segment rose from 54.7% in 2025 to 63.7% in the first half of 2026, indicating an excessive reliance on a single business line. This pattern may amplify operational leverage benefits during periods of industry prosperity; however, if the core sector encounters regulatory adjustments, intensified competition, or reductions in capital expenditure by owners, fluctuations in this single segment will drag down performance through its high revenue proportion. Concurrently, the income contribution from the company's other three business lines continues to shrink, while its stated positioning as a "comprehensive electromechanical engineering service provider" reveals a clear resource tilt and business discontinuity in its revenue structure, with the effectiveness of its diversification synergies yet to be validated. Behind the order boom Concerns over cash flow and the approach of industry cycle tests From an industry fundamentals perspective, the Singapore electromechanical engineering market is currently in a steady expansion phase. According to the prospectus, the market size (valued in output) of Singapore's electromechanical engineering market grew from SGD 1.97 billion in 2020 to SGD 4.18 billion in 2025, with a compound annual growth rate of about 16.2%. Looking ahead, the market is expected to further expand from SGD 4.18 billion in 2025 to SGD 5.99 billion in 2030, with a compound annual growth rate of approximately 7.5%. Amidst overall economic recovery and continuous infrastructure development, there is indeed some support for industry demand. However, positive aggregate data does not equate to an improvement in the competitive landscape. The market growth rate has sharply slowed from 16.2% over the past five years to 7.5% in the next five years, indicating a transition from an "incremental dividend" stage to a "stock game" stage. For Ever Glory, the pressure from this turning point is considerable. When the pace of industry growth drops from double digits to single digits, leading firms will likely resort to price strategies to compete for limited new projects to maintain their own revenue growth, which will directly compress the industrys average bidding gross margins. The dramatic fluctuation in the company's gross margin from 23.07% in 2024 to 15.70% reflects the rising intensity of industry competition. Additionally, while the company ranks fourth in Singapore with about 2% market share, the effectiveness of L6-level qualifications as an entry barrier may be overestimated during the industry slowdown. While it does limit the number of new entrants, there are no substantial differentiated barriers among existing L6 licensed enterprises, leading to the decisive factors in project bidding ultimately returning to price and service responsivenessL6 qualifications can keep "outsiders" away, but do not prevent "brother firms" within the same tier from engaging in price battles. The existing order backlog is the most easily magnified valuation anchor for Ever Glory. As of June 30, 2026, the total order backlog was SGD 838 million, and by August 3, it had further climbed to SGD 1 billion. This abundant order reserve theoretically covers revenue expectations for the next 2 to 3 years, forming part of the core bullish logic for institutional investors. However, the value realization for construction companies does not hinge on the "nominal size" of orders but rather on the actual rate and quality of conversion to revenue and cash, where "order conversion efficiency" and "contract asset recovery cycle" are the key variables. Electromechanical engineering is essentially a project-based business model, with profit realization highly reliant on various factors such as gross margin on winning bids, construction progress management, order change confirmation cycles, owner settlement rhythms, and fluctuations in foreign labor costs. Scale expansion does not equate to simultaneous improvement in profit quality. From a financial data perspective, the companys gross margin has exhibited significant volatility: at 23.07% in 2023, it plummeted to 15.70% in 2024, and while it recovered to 19.20% in 2025, it has yet to return to 2023 levels. This volatility trajectory reflects uncertainties in the companys project cost estimation, construction deviation control, and supply chain management. At the same time, the company's general and administrative expenses surged from SGD 1.525 million in 2023 to SGD 8.8 million in 2025, an increase of 477%, with rapidly swollen expenses continuing to erode profit margins. More concerning is the tightening of the cash flow chain. As of the end of June 2026, the company's cash and cash equivalents were only about SGD 24 million, while the net operating cash flow for the entire year of 2025 was only about SGD 10 million, with the ratio of operating cash to net profit during the same period significantly below 1, reflecting a low cash conversion rate of profitsthis is a typical characteristic of the accumulation of contract assets and receivables in construction projects, which occupy working capital. Considering that the acquisition of Guthrie Engineering has consumed a large portion of cash reserves, its liquidity buffer is extremely limited. For construction companies that require advance payments for projects, the efficiency of working capital turnover directly relates to whether existing orders can be smoothly converted into confirmed revenue. Additionally, the companys financial costs skyrocketed from SGD 39,000 in 2023 to SGD 1.134 million in 2025, an increase of over 28 times, indicating that interest-bearing liabilities are rapidly expanding, and rising debt financing costs will further erode profit margins, with the companys balance between scale expansion and financial safety facing increasingly severe challenges.