GRAND POWER LOGISTICS GROUP LIMITED

Transcription

1 The Stock Exchange of Hong Kong Limited and the Securities and Futures Commission take no responsibility for the contents of this Application Proof, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this Application Proof. Application Proof of GRAND POWER LOGISTICS GROUP LIMITED (the Company ) (Incorporated in the Cayman Islands with limited liability) WARNING The publication of this Application Proof is required by The Stock Exchange of Hong Kong Limited (the Stock Exchange ) and the Securities and Futures Commission (the SFC ) solely for the purpose of providing information to the public in Hong Kong. This Application Proof is in draft form. The information contained in it is incomplete and is subject to change which can be material. By viewing this document, you acknowledge, accept and agree with the Company, its sponsor, advisers or members of the underwriting syndicate that: (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) this document is only for the purpose of providing information about the Company to the public in Hong Kong and not for any other purposes. No investment decision should be based on the information contained in this document; the publication of this document or supplemental, revised or replacement pages on the Stock Exchange s website does not give rise to any obligation of the Company, its sponsor, advisers or members of the underwriting syndicate to proceed with an offering in Hong Kong or any other jurisdiction. There is no assurance that the Company will proceed with the offering; the contents of this document or supplemental, revised or replacement pages may or may not be replicated in full or in part in the actual final listing document; the Application Proof is not the final listing document and may be updated or revised by the Company from time to time in accordance with the Rules Governing the Listing of Securities on GEM of The Stock Exchange of Hong Kong Limited; this document does not constitute a prospectus, offering circular, notice, circular, brochure or advertisement offering to sell any securities to the public in any jurisdiction, nor is it an invitation to the public to make offers to subscribe for or purchase any securities, nor is it calculated to invite offers by the public to subscribe for or purchase any securities; this document must not be regarded as an inducement to subscribe for or purchase any securities, and no such inducement is intended; neither the Company nor any of its affiliates, advisers or members of the underwriting syndicate is offering, or is soliciting offers to buy, any securities in any jurisdiction through the publication of this document; no application for the securities mentioned in this document should be made by any person nor would such application be accepted; the Company has not and will not register the securities referred to in this document under the United States Securities Act of 1933, as amended, or any state securities laws of the United States; as there may be legal restrictions on the distribution of this document or dissemination of any information contained in this document, you agree to inform yourself about and observe any such restrictions applicable to you; and the application to which this document relates has not been approved for listing and the Stock Exchange and the SFC may accept, return or reject the application for the subject public offering and/or listing. If an offer or an invitation is made to the public in Hong Kong in due course, prospective investors are reminded to make their investment decisions solely based on the Company s prospectus registered with the Registrar of Companies in Hong Kong, copies of which will be distributed to the public during the offer period.

2 Important IMPORTANT: If you are in any doubt about any of the contents of this document, you should obtain independent professional advice. GRAND POWER LOGISTICS GROUP LIMITED (Incorporated in the Cayman Islands with limited liability) [REDACTED] Number of [REDACTED] : [REDACTED] Shares Number of [REDACTED] : [REDACTED] Shares (subject to reallocation) Number of [REDACTED] : [REDACTED] Shares (subject to reallocation) [REDACTED] : Not more than HK$[REDACTED] per [REDACTED] and expected to be not less than HK$[REDACTED] per [REDACTED] (payable in full in Hong Kong dollars on application plus brokerage of 1%, SFC transaction levy of % and Stock Exchange trading fee of 0.005% and subject to refund) Nominal value : HK$0.01 per Share Stock code : [ ] Sole Sponsor [REDACTED] Hong Kong Exchanges and Clearing Limited, The Stock Exchange of Hong Kong Limited and Hong Kong Securities Clearing Company Limited take no responsibility for the contents of this document, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this document. A copy of this document, having attached thereto the documents specified in Appendix VI Documents Delivered to the Registrar of Companies in Hong Kong and Available for Inspection in this document, has been registered by the Registrar of Companies in Hong Kong as required by Section 342C of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Chapter 32 of the Laws of Hong Kong). The Securities and Futures Commission of Hong Kong and the Registrar of Companies in Hong Kong take no responsibility as to the contents of this document or any other documents referred to above. The [REDACTED] is currently expected to be determined by agreement between our Company and the [REDACTED] (for [itself] and on behalf of the [REDACTED]) on the [REDACTED], which is scheduled on or about [REDACTED], or such later date as may be agreed between our Company and the [REDACTED] (for [itself] and on behalf of the [REDACTED]). The [REDACTED] will be not more than HK$[REDACTED] per [REDACTED] and is currently expected to be not less than HK$[REDACTED] per [REDACTED] unless otherwise announced. The [REDACTED] may, with our consent, reduce the indicative [REDACTED] range and/or the number of [REDACTED] stated in this document at any time prior to the morning of the last day for lodging applications under the [REDACTED]. If this occurs, notice of reduction of the indicative [REDACTED] range and/or the number of [REDACTED] will be published on the Stock Exchange s website at and our website at If, for any reason, the [REDACTED] is not agreed between our Company and the [REDACTED] (for [itself] and on behalf of the [REDACTED]) on or before [REDACTED] (or such other time as our Company and the [REDACTED] (for [itself] and on behalf of the [REDACTED]) may agree), the [REDACTED] will not become unconditional and will lapse immediately. The [REDACTED] have not been and will not be registered under the U.S. Securities Act or any state securities laws of the United States of America and may not be offered, sold, pledged or transferred within the United States of America, except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the U.S. Securities Act and in accordance with any applicable U.S. securities law. The [REDACTED] are being offered and sold only outside the United States of America in offshore transactions in reliance on Regulation S. Prior to making any [REDACTED] decision, prospective [REDACTED] should consider carefully all the information set out in this document, including the risk factors set out in Risk Factors in this document. Prospective [REDACTED] of the [REDACTED] should note that the obligations of the [REDACTED] under the [REDACTED] are subject to termination by the [REDACTED] (for [itself] and on behalf of the [REDACTED]) upon occurrence of any of the events set forth in [REDACTED] [REDACTED] Arrangements and Expenses [REDACTED] Grounds for termination in this document at any time prior to 8: 00 a.m. (Hong Kong time) on the [REDACTED]. Should the [REDACTED] (for [itself] and on behalf of the [REDACTED]) terminate the [REDACTED], the [REDACTED] will not proceed and will lapse. Further details of these termination provisions are set out in [REDACTED] in this document. It is important that prospective [REDACTED] refer to that section for further details. [REDACTED]

3 CHARACTERISTICS OF GEM GEM has been positioned as a market designed to accommodate small and mid-sized companies to which a higher investment risk may be attached than other companies listed on the Stock Exchange. Prospective [REDACTED] should be aware of the potential risks of [REDACTED] such companies and should make the decision to [REDACTED] only after due and careful consideration. The greater risk profile and other characteristics of GEM mean that it is a market more suited to professional and other sophisticated [REDACTED]. Given that companies listed on GEM are generally small and mid-sized companies, there is a risk that securities traded on GEM may be more susceptible to high market volatility than securities traded on the Main Board of the Stock Exchange and no assurance is given that there will be a liquid market in the securities traded on GEM. i

4 EXPECTED TIMETABLE (1) [REDACTED] ii

5 EXPECTED TIMETABLE (1) [REDACTED] iii

6 EXPECTED TIMETABLE (1) [REDACTED] iv

7 CONTENTS This document is issued by our Company solely in connection with the [REDACTED] and does not constitute an offer to sell or a solicitation of an offer to buy any security other than the [REDACTED] offered by this document pursuant to the [REDACTED]. This document may not be used for the purpose of, and does not constitute, an offer to sell or a solicitation of an offer in any other jurisdiction or in any other circumstances. No action has been taken to permit a [REDACTED] of the [REDACTED] or the distribution of this document in any jurisdiction other than Hong Kong. You should rely only on the information contained in this document and the [REDACTED] to make your [REDACTED] decision. Our Company, the Sole Sponsor, the [REDACTED], the [REDACTED] and the [REDACTED] have not authorised anyone to provide you with information that is different from what is contained in this document. Any information or representation not made in this document must not be relied on by you as having been authorised by our Company, the Sole Sponsor, the [REDACTED], the [REDACTED], the [REDACTED], any of their respective directors, advisers, officers, employees, agents or representatives or any other person involved in the [REDACTED]. Page Characteristics of GEM... Expected Timetable... Contents... i ii iv Summary... 1 Definitions Glossary of Technical Terms Forward-looking Statements Risk Factors Information about this document and the [REDACTED] Directors and Parties Involved in the [REDACTED] Corporate Information Industry Overview Regulatory Overview History, Reorganisation and Corporate Structure v

8 CONTENTS Business Relationship with Controlling Shareholders Connected Transaction Directors and Senior Management Substantial Shareholders Share Capital Financial Information Future Plans and [REDACTED] [REDACTED] Structure and Conditions of the [REDACTED] How to Apply for the [REDACTED] Appendix I Accountants Report... I-1 Appendix II Unaudited [REDACTED] Financial Information... II-1 Appendix III Property Valuation... III-1 Appendix IV Summary of the Constitution of the Company and Cayman Islands Company Law... IV-1 Appendix V Statutory and General Information... V-1 Appendix VI Documents Delivered to the Registrar of Companies in Hong Kong and Available for Inspection... VI-1 vi

9 SUMMARY This summary aims to give you an overview of the information contained in this document. As it is a summary, it does not contain all the information that may be important to you. You should read this document in its entirety before you decide to [REDACTED] in the [REDACTED]. There are risks associated with any [REDACTED]. Some of the particular risks in [REDACTED] in the [REDACTED] are set out in Risk Factors in this document. You should read that section carefully before you decide to [REDACTED] in the [REDACTED]. OVERVIEW We are a long-established freight forwarder headquartered in Hong Kong, with our sales force in Hong Kong and six regional offices in the PRC, including Shanghai, Shenzhen, Guangzhou, Xiamen, Tianjin and Fuzhou as at the Latest Practicable Date, focusing on the market in Hong Kong, the PRC and Macau. We provide port to port air and ocean export and import freight forwarding services, with optional ancillary logistics services (such as cargo pick up, cargo handling at ports and local transportation) and warehousing services (such as repackaging, labelling, palletising, customs clearance and warehousing) to meet the requirements of our customers. According to the CIC Report, the freight forwarding logistics industry in Hong Kong is fragmented and highly competitive. In 2017, there were around 1,400 industry peers based in Hong Kong which can be divided into two tiers, consisting of (i) tier one players, mainly multinational enterprises, who contributed about half of the total revenue of air freight forwarding logistics industry in Hong Kong; and (ii) tier two players, being small- and mediumscale Hong Kong based freight forwarders (having a turnover below HK$1.5 billion per year), who accounted for a market share of 7.5% in aggregate. We are one of the constituents of the tier two players. We derive our revenue from two business segments, namely air freight forwarding services and ocean freight forwarding services. For FY2016, FY2017 and 4M2018, our total revenue derived from these two segments amounted to approximately HK$332.1 million, HK$425.4 million and HK$131.5 million, respectively. Our business focus is on the provision of air freight export services from the PRC, Hong Kong and Macau to over 120 countries in Europe, Asia, North America and other regions (including South America, Oceania and Africa); For FY2016, FY2017 and 4M2018, our total revenue attributable to the provision of air freight export services amounted to approximately HK$297.9 million, HK$400.4 million and HK$127.2 million, respectively, representing 89.7%, 94.1% and 96.7% of our total revenue for the same periods. Our suppliers include airlines, freight forwarders and shipping liners for cargo space and other suppliers for logistics related services such as transportation and warehousing services. We source cargo spaces from our suppliers under different arrangements including direct booking, block space arrangements, and flight charters. During the Track Record Period, we had over 500 cargo space suppliers, including ten airlines and shipping liners as well as other freight forwarders suppliers. We have long established business relationships with various international airlines since Amongst our major suppliers in the Track Record Period, four were international airlines. Our relationship with airlines has been recognised, as we were awarded various awards by different airlines in the past years. To maximise our flexibility in securing cargo spaces, we also source cargo spaces from other freight forwarders depending on their cargo space availability, capacity, routing and timing. Our ability to secure cargo spaces from these airlines as well as other freight forwarders enable us to reach a wide range of destinations. 1

10 SUMMARY Our customers include freight forwarders and direct customers. According to the CIC Report, it is a common industry practice for small- and medium-sized freight forwarders to co-load their consignments with each other for maximum utilisation of cargo space. As a coloader in the industry, in terms of our total revenue, a majority of our customers are other freight forwarders who act on behalf of their own customers during the Track Record Period. With our established track record of over 16 years in serving the freight forwarding industry with recognised quality, we have provided freight forwarding services to over 800 customers. Out of our eight major customers during the Track Record Period, we have maintained business relationships with three of them with nine years as at the Latest Practicable Date, which we believe is an indication of the customers loyalty and recognition of our service quality. BUSINESS MODEL The following illustrates how we source cargo space from our suppliers (such as airlines, shipping liners or freight forwarders) and sell them to our customers (such as direct customers and freight forwarders): Cargo Space Cargo Space Payment Payment Airlines/ Shipping liners Cargo Space Payment Freight Forwarders Cargo Space Payment Our Group Cargo Space Payment Freight Forwarders Cargo Space Payment Direct Customers Carriers Freight Forwarders Consignors We procure cargo spaces directly from airlines, shipping liners or other freight forwarders suppliers under different arrangements, including (i) direct booking; (ii) block space arrangements; and (iii) flight charters. In order to maximise our flexibility, we have not entered into any fixed-term or exclusive agreements with our cargo space suppliers, except in December 2017, being the normal peak season of freight forwarding industry, during which we entered into two charter flight agreements with a Hong Kong based airline for a partial charter of flight to Taiwan and a full charter of flight to Singapore, and in January 2018, a block space agreement with the same airline for supply of cargo space to Taiwan for the year of

11 SUMMARY OUR SERVICES We derive our revenue from two business segments, namely air freight forwarding services and ocean freight forwarding services, which include both import and export of goods. During the Track Record Period, our business focus was on air freight export as illustrated in the following table: FY2016 FY2017 4M2017 4M2018 (HK$ 000) (%) (HK$ 000) (%) (HK$ 000) (%) (HK$ 000) (%) (Unaudited) Exports Air Freight 297, , , , Ocean Freight 32, , , , Imports 1, Total 332, , , , Our freight forwarding services (both air and ocean) principally involve arranging shipment upon receipt of booking instructions from our customers, obtaining cargo space from cargo space suppliers (including airlines, shipping liners and other freight forwarders) and preparing the relevant documentations (such as customs clearance from origin of consignment). We also arrange ancillary services to our air freight forwarding services, including logistics and warehousing to meet our customer s requirement. For FY2016, FY2017 and 4M2018, our revenue attributable to air freight forwarding export amounted to approximately HK$297.9 million, HK$400.4 million and HK$127.2 million, representing 89.7%, 94.1% and 96.7% of our total revenue, respectively; and our revenue from ocean freight export amounted to approximately HK$32.8 million, HK$24.1 million and HK$3.7 million, representing 9.9%, 5.7% and 2.8% of our total revenue, respectively. COMPETITIVE STRENGTHS We believe that we have a number of key strengths that distinguish us from our competitors: We have established track record of over 16 years in serving the freight forwarding industry with recognised quality. We are well positioned to take advantage of favourable growth area. We have comprehensive business network with airlines and other freight forwarders providing a wide range of choices of routes and capacities. We have a loyal and experienced management team responsive to changing market conditions. Please see Business Competitive Strengths for details. 3

12 SUMMARY BUSINESS STRATEGIES Our key strategies are to: Strengthening our market position in Hong Kong and the PRC. Expanding our reach to potential customers in the PRC by establishing new offices in the PRC. Improving our ability to obtain cargo spaces through closer collaboration with airlines. Please see Business Strategies on Future Business Development for details. SALES, CUSTOMERS AND MARKETING Our customers include freight forwarders and direct customers. In terms of our total revenue, a majority of our customers are other freight forwarders who act on behalf of their own customers during the Track Record Period. Our revenue derived from other freight forwarders amounted to approximately HK$296.5 million, HK$400.4 million and HK$127.3 million, representing 89.3%, 94.1% and 96.8% of the total revenue for FY2016, FY2017 and 4M2018, respectively. During the Track Record Period, we had served more than 800 customers. According to the CIC Report, smaller market players tend to develop their flight network regionally. For destinations out of their usual network, they will purchase the services from other freight forwarders which specialised in the operation of the required routes. As such, while we provide air freight forwarding service to other freight forwarders (as our customers), we would require the expertise and connection of these freight forwarders (as our suppliers) to provide cargo space to us, which is driven by the need of our customers. During the Track Record Period, some of our major customers were also our suppliers and vice versa. Please see Business Customers Entities who are our customers and suppliers for details. We have been accredited with membership of IATA which is a well-recognised associations within the industry. Our Directors believe that by being part of such wide network of freight forwarders and other industry participants, we are able to reach out to an extensive network of suppliers and customers, thereby potentially diversifying and enhancing our supplier and customer base. Since a majority of our clients are freight forwarders, we mainly rely on referral by our customers and by word of month for new customers. PRICING STRATEGY Our Directors are responsible for determining the selling price of air cargo space. We adopt a cost-plus pricing approach, and the selling price is generally based on the rate lists provided by our suppliers plus a target profit margin. We take into account the following factors in determining our final freight rates we charge our customers: type and value of consignment shipped; volume of cargo space ordered; 4

13 SUMMARY business relationship with the customer; cost of services, including the cost of cargo spaces, security charge, terminal charge, fuel surcharge mainly; rates offered by our competitors; level of acceptance of the current market rates for similar services; availability of cargo space; and any ancillary logistics services required. CARGO SPACE PROCUREMENT AND SUPPLIERS We procure cargo spaces directly from airlines and shipping liners as well as from other freight forwarders under different arrangements, including direct booking, block space arrangements, and flight charters. In order to maximise our flexibility, we have not entered into any fixed-term or exclusive agreements with our cargo space suppliers, except in December 2017, we entered into two charter flight agreements with a Hong Kong based airline for a partial charter of flight to Taiwan and a full charter of flight to Singapore, and in January 2018, a block space agreement with the same airline for supply of cargo space to Taiwan for the year of 2018 to meet the demand of a customer who entered into a strategic partnership agreement with us in December 2017, being the normal peak season of freight forwarding industry, for our supply of a fixed volume of cargo spaces during the year of During the Track Record Period, we had over 500 cargo space suppliers, including ten airlines and shipping liners as well as other freight forwarders suppliers. In order to procure cargo spaces from airlines, we are often required to provide bank guarantees and settle payment within a relatively short credit period of around 15 to 30 days, while we provide a credit term of up to 90 days to our customers, resulting in a credit mismatch. CONTROLLING SHAREHOLDERS Immediately following completion of the [REDACTED] and [REDACTED] (without taking into account any Shares to be issued upon exercise of any options which may be granted under the Share Option Scheme), the issued share capital of our Company will be owned as to [REDACTED] by Peak Connect and [REDACTED] by Profit Virtue respectively. Peak Connect is owned as to 92.32% and 7.68% by Mr. Chiu and Ms. Wong, respectively, while Profit Virtue is wholly owned by Mr. Chiu. For the purpose of the GEM Listing Rules, Mr. Chiu is regarded as a Controlling Shareholder. Further, Mr. Chiu and Ms. Wong are regarded as a group of Controlling Shareholders due to their relationship as spouses. Accordingly, for the purpose of the GEM Listing Rules, Peak Connect, Profit Virtue, Mr. Chiu and Ms. Wong will be regarded as Controlling Shareholders of our Company upon [REDACTED]. Please see Relationship with Controlling Shareholders for details. 5

14 SUMMARY PRIVATISATION AND DELISTING OF GRAND POWER LOGISTICS GROUP INC. In order to raise additional capital for the expansion plan of Grand Power Express International Limited, Grand Power Logistics Group Inc., the then holding company of Grand Power Express International Limited, proceeded with its initial public offering and listing on the TSX Venture Exchange in Canada in On 28 October 2004, Grand Power Logistics Group Inc. closed its initial public offering of 2,500 units, each unit comprising 750 common shares and one convertible unsecured debenture. The offering raised a total of CA$375,000 in share capital and CA$2,125,000 in debentures. After considering that the share price of Grand Power Logistics Group Inc. was undervalued and it was difficult to raise capital in the stock markets in Canada in the recent years, Mr. Chiu and Ms. Wong intended to privatise and delist Grand Power Logistics Group Inc. from the TSX Venture Exchange. In October 2016, Grand Power Logistics Group Inc. entered into an amalgamation agreement with Alberta Ltd. pursuant to which Grand Power Logistics Group Inc. was taken private by way of an amalgamation between these two companies. The amalgamation was completed on 3 January 2017 and the common shares of Grand Power Logistics Group Inc. were delisted from the TSX Venture Exchange at the close of business on 6 January Please see History, Reorganisation and Corporate Structure History and Development Listing and delisting on the TSX Venture Exchange in Canada for details. SUMMARY OF OUR FINANCIAL INFORMATION AND OPERATION DATA Key Income Statement Information The following table summarises the combined statement of profit or loss from the financial statements during the Track Record Period, details of which are set out in the Accountants Report in Appendix I to this document. FY2016 FY2017 4M2017 4M2018 HK$ 000 HK$ 000 HK$ 000 HK$ 000 (unaudited) Revenue 332, , , ,495 Gross profit 33,457 46,467 9,759 14,010 Profit before income tax 8,157 17,133 1,890 1,605 Profit for the year/period 7,246 12,614 1, Key Balance Sheet Information The following table sets out our combined statements of financial position as at the dates indicated: As at FY2016 FY April 2018 HK$ 000 HK$ 000 HK$ 000 Non-current assets 61,338 59,779 58,502 Current assets 141, , ,645 Non-current liabilities 3, Current liabilities 131, ,524 96,136 Net current assets 9,634 23,366 25,509 Total equity 67,234 82,705 83,703 6

15 SUMMARY Key Financial Ratios The following table sets out our key financial ratios as at each of the dates indicated: FY2016 FY2017 As at 30 April 2018 Gross Profit Margin (%) Net Profit Margin (%) Return on equity (%) Return on total assets (%) As at 31 December As at April 2018 Current ratio Gearing ratio (%) Net debt to equity ratio (%) For details, please see Financial Information Key Financial Ratios. COMPETITIVE LANDSCAPE According to the CIC Report, the market size of the air freight forwarding industry in Hong Kong reached HK$51.3 billion in 2017, representing a cargo volume of 3,239 thousand tonnes. Our industry is fragmented and highly competitive with competitors of different sizes. In 2017, there were around 1,400 industry peers based in Hong Kong which can be divided into two tiers. Tier one players are mainly multinational enterprises, contributing about half of the total revenue of air freight forwarding logistics industry in Hong Kong, while tier two players are small- and medium-scale Hong Kong based local enterprises operating in the industry. Among top 10 smalland medium-scaled Hong Kong-based international freight forwarders (having a turnover below HK$1.5 billion per year, which accounted for a market share of 7.5% in aggregate). We compete with freight forwarders of all sizes, ranging from global and Chinese leading participants having their own global network of offices and transportation fleet or long-term relationship with international major carriers (which account for around half of the total revenue in the industry), to small- and medium-scaled freight forwarders like ourselves, which have a deeper understanding of the customers business nature and long-term relationship with customers based in Hong Kong and the Pearl River Delta. We believe that our competitive strengths, details of which set out in Summary Competitive Strengths in this section, distinguish us from our competitors. To the best of the knowledge of our Directors, none of our Directors, their respective associates or any shareholder who owns more than 5% of our issued share capital had any interest in any of our competitors during the Track Record Period and as at the Latest Practicable Date. 7

16 SUMMARY [REDACTED] [REDACTED] of Shares (1) Based on the [REDACTED] of HK$[REDACTED] per Share HK$[REDACTED] million Based on the [REDACTED] of HK$[REDACTED] per Share HK$[REDACTED] million [REDACTED] adjusted combined net tangible assets HK$[REDACTED] HK$[REDACTED] per Share (2) Notes: 1. The calculation of the [REDACTED] of Shares is based on [REDACTED] Shares in issue immediately following completion of the [REDACTED] and the [REDACTED]. It does not take into account of any Share which may be allotted and issued upon the exercise of any option that may be granted under the Share Option Scheme, or any Share which may be issued or repurchased pursuant to our Company s general mandate. 2. The unaudited [REDACTED] adjusted combined net tangible assets of our Group attributable to owners of our Company per Share have been prepared with reference to certain estimation and adjustment. Please refer to Appendix II Unaudited [REDACTED] Financial Information in this document for further details. Summary of key RISK FACTORS There are certain risks involved in our Group s operations, many of which are beyond our Group s control. Material risks we face include: (a) (b) (c) (d) (e) (f) Our international freight forwarding business is significantly affected by changes in global economic and social conditions. We experienced an overall growth in revenue during the Track Record Period and may not be able to maintain such growth in the future. Our cash flow may deteriorate due to potential mismatch in time between receipt of payments from our customers and payments to our suppliers, and we may take a long time to collect our trade receivables. Almost all the cargo spaces we source are non-committed purchases and therefore we may not be able to meet our customers demand. We are dependent on our customers business performance and their continuing demand for international freight forwarding services. Trade war or restrictions, whether in form of embargo, tariff, or otherwise, effected between two or more states, including the risks arising from recent events between the PRC and the U.S., could materially and adversely affect our business, financial condition and results of operations For details of the various risks and uncertainties we face, please see Risk Factors in this document. 8

17 SUMMARY DIVIDEND During the Track Record Period, no dividend has been paid or declared by our Company since its date of incorporation. The declaration of dividends is subject to the discretion of our Board and the approval of our Shareholders. Our Directors may recommend a payment of dividends in the future after taking into account our operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions, capital expenditure and future development requirements, shareholders interests and other factors which they may deem relevant at such time. Any declaration and payment as well as the amount of the dividends will be subject to our constitutional documents and the Cayman Islands Companies Law, including the approval of our Shareholders. Any future declarations of dividends may or may not reflect our historical declarations of dividends and will be at the absolute discretion of our Directors. [REDACTED] Our Directors believe that the [REDACTED] will enhance our Group s profile and the [REDACTED] from the [REDACTED] will strengthen our [REDACTED] base and will provide funding to our Group for achieving our business strategies and future plans as set out in Business Strategies on Future Business Development and Future Plans and [REDACTED] in this document. The [REDACTED] of the [REDACTED], after deducting the [REDACTED] fees and estimated expenses payable in connection thereto for the year ending 31 December 2018, are estimated to be approximately HK$[REDACTED] million (without taking into account any option(s) which may be granted under the Share Option Scheme and assuming an [REDACTED] of HK$[REDACTED] per Share, being the mid-point of the indicative [REDACTED] range). We intend to apply such [REDACTED] as follows: approximately [REDACTED] of the [REDACTED], or approximately HK$[REDACTED] million will be applied to finance our additional payment obligation and for provision of bank guarantee to airlines for a larger volume of cargo spaces; approximately [REDACTED] of the [REDACTED], or approximately HK$[[REDACTED] million will be applied to one to two charter cargo flights to secure cargo spaces during the peak season of freight forward industry; approximately [REDACTED] of the [REDACTED], or approximately HK$[REDACTED] million will be applied to open new regional offices located in the PRC in order untapped regions that we do not have a geographical presence in; and approximately [REDACTED] of the [REDACTED], or approximately HK$[REDACTED] million will be applied for general working capital. [REDACTED] EXPENSES [REDACTED] expenses represent professional fees, [REDACTED] commission, SFC transaction levy and Stock Exchange trading fee incurred in connection with the [REDACTED] and the [REDACTED]. Assuming an [REDACTED] of HK$[REDACTED] per [REDACTED] (being the mid-point of the indicative [REDACTED] range), our total [REDACTED] expenses is estimated to be approximately HK$[REDACTED] million, of which HK$[REDACTED] million is directly attributable to the issue of new Shares and to be accounted for as a deduction from the equity, and the remaining amount of HK$[REDACTED] million has been or will be reflected in our combined statements of profit or loss. [REDACTED] expenses, of nil, HK$5.2 million and HK$[4.0] million, in relation to services already performed by relevant parties, were reflected in our combined statements of profit or loss for FY2016, FY2017 and 4M2018, respectively, and an additional of HK$[REDACTED] million is expected to be recognised in our combined statements of profit or loss subsequent to the Track Record Period and upon [REDACTED]. 9

18 SUMMARY REASONS FOR THE [REDACTED] Our Directors believe that the growing prevalence of cross-border e-commerce activities will drive the air freight forwarding market to achieve a continuous growth. In order for us to increase our market share and further expanding our freight forwarding business, we believe it is vital for us to increase our [REDACTED] base. We consider the [REDACTED] not only provides [REDACTED] to cope with our expansion plans, but also provides other intangible benefits such as a convenient [REDACTED] platform, which is only available to listed companies, for our Group to obtain both [REDACTED] in the future. As stated in Business Business Strategies in this document, we intend to achieve an increase in market share and further expanding our freight forwarding business by expanding our reach to potential customers and improving our ability to provide cargo spaces through closer collaboration with suppliers. The procurement of cargo spaces from airlines requires bank guarantees and a relatively short credit period of 15 to 30 days, against a credit term of up to 90 days provided to our customers which results in a credit mismatch. Taken into consideration of the historical settlement pattern of our customers, our Directors believe, on each sales we made, we are required to fulfil our payments obligation approximately 45 days before receiving settlement from our customer. To cope with the expansion of business, it will be inevitable to provide further bank guarantee to secure our payment obligation as required by our airline suppliers, and obtain additional capital to finance our credit mismatch. Our Directors consider that while we maintain a healthy cash level to support our existing operations, based on the strong capital need of the freight forwarding industry, our existing facilities fall short in implementing our strategy and we need external financing from the [REDACTED]. We believe that banks and financial institutions are more willing to establish business relationship with companies with a [REDACTED] status. We also believe that a [REDACTED] status can generate reassurance among our Group s existing banks with enhanced transparency. The regular financial reporting requirement under GEM Listing Rules can enable the bank to evaluate and monitor our Group s financial position more effectively and therefore is expected to smoothen the approval process for any future additional bank borrowings. The better accessibility to banking facilities allow us more flexibility in management of the cashflow of our business that can be affected by factors including those set out in the section headed Risk factors in this document. Further, our Directors consider that the [REDACTED] and the [REDACTED] will provide us with access to [REDACTED] market for future [REDACTED] exercises to assist in our future business development and further strengthen and enhance our competitiveness, and a broader shareholder base which could potentially lead to a more [REDACTED] market in the [REDACTED] of the Shares. RECENT DEVELOPMENT AND MATERIAL ADVERSE CHANGE Subsequent to the Track Record Period and up to the Latest Practicable Date, in July 2018 we have terminated the factoring agreement in the sum of HK$60 million with a licensed bank, and have entered into (i) a facility agreement under The Small and Medium Enterprises Loan Guarantee Scheme for an instalment loan of HK$12 million effective in July 2018; (ii) a facility agreement with a licensed bank for a facility limit of HK$28 million effective in May 2018; and (iii) a facility agreement with a licensed bank for a revolving loan in the sum of HK$10 million effective in July We shall incur administrative expenses after the [REDACTED] for regulatory compliance, such as professional fees and financial reporting costs. After taking into account the additional administrative expenses and the general increase in our administrative headcounts after [REDACTED], our Directors anticipate that our net profit margin (before [REDACTED] expenses) for FY2018 will drop against the same for FY2017, assuming the revenue for FY2018 remains the same as FY2017. Our business model has remained unchanged since 30 April Our Directors confirm that to their best knowledge and belief, save as disclosed in this document, there had been no material adverse change in our financial or trading position or prospects since 30 April 2017 and up to the date of this document, and that there has been no event since 30 April 2017 which would materially affect the information shown in the Accountants Report, the text of which is set out in Appendix I to this document. Save as disclosed in this document, our Directors also confirm that there has not been any material change in our indebtedness and contingent liabilities since 30 April

19 DEFINITIONS In this document, the following expressions and terms shall have the meanings set out below unless the context otherwise requires. 4M2017 the four months ended 30 April M2018 the four months ended 30 April 2018 Accountants Report acting in concert [REDACTED] Articles or Articles of Association associate(s) or close associate(s) Audit Committee Board or our Board Business Day BVI Canadian dollars or CA$ or CAD the accountants report of our Group prepared by reporting accountants, the full text of which is set out in Appendix I Accountants Report in this document has the meaning ascribed thereto under the Takeovers Code [REDACTED], [REDACTED] and [REDACTED] or, where the context so requires, any of them the amended and restated articles of association of our Company, conditionally adopted on [ ] 2018 to become effective upon the [REDACTED], and as amended from time to time, a summary of which is set out in Appendix IV Summary of the Constitution of the Company and Cayman Islands Company Law in this document has the meaning ascribed thereto under the GEM Listing Rules the audit committee of our Board our board of Directors a day (other than a Saturday, Sunday or public holiday in Hong Kong) on which licensed banks in Hong Kong are generally open for normal business to the public British Virgin Islands Canadian dollars, the lawful currency of Canada 11

20 DEFINITIONS [REDACTED] CCASS CCASS Clearing Participant CCASS Custodian Participant CCASS Investor Participant CCASS Participant CIC CIC Report Companies Law or Cayman Companies Law Companies Ordinance Companies Registry Companies (WUMP) Ordinance Company or our Company the issue of [REDACTED] Shares to be made upon the capitalisation of certain sums standing to the credit of the share premium account of our Company referred to in Appendix V Statutory and General Information A. Further Information about our Company 3. Written resolutions of our Shareholders passed on [ ] 2018 in this document the Central Clearing and Settlement System established and operated by HKSCC a person admitted to participate in CCASS as a direct clearing participant or general clearing participant a person admitted to participate in CCASS as a custodian participant a person admitted to participate in CCASS as an investor participant who may be an individual or joint individuals or a corporation a CCASS Clearing Participant, a CCASS Custodian Participant or a CCASS Investor Participant China Insights Consultancy Limited, a market research and analysis service provider engaged by our Company to prepare the CIC Report and an Independent Third Party the industry report prepared by CIC, which was commissioned by us in relation to, amongst other things, the freight forwarding industry in Hong Kong the Companies Law, Cap. 22 (Law 3 of 1961, as consolidated and revised) of the Cayman Islands the Companies Ordinance (Chapter 622 of the Laws of Hong Kong), as amended, supplemented or otherwise modified from time to time the Companies Registry of Hong Kong the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Chapter 32 of the Laws of Hong Kong), as amended, supplemented or otherwise modified from time to time Grand Power Logistics Group Limited, a company incorporated in the Cayman Islands as an exempted company with limited liability on 29 March

21 DEFINITIONS connected person(s) Controlling Shareholder(s) core connected person(s) Corporate Governance Code Deed of Indemnity Deed of Non-competition Director(s) has the meaning ascribed thereto under the GEM Listing Rules has the meaning ascribed to it under the GEM Listing Rules and, in the context of this document, means the controlling shareholders of our Company, namely Mr. Chiu, Ms. Wong, Peak Connect and Profit Virtue. Further details are set out in Relationship with Controlling Shareholders in this document has the meaning ascribed thereto under the GEM Listing Rules the Corporate Governance Code and Corporate Governance Report as set out in Appendix 15 to the GEM Listing Rules the deed of indemnity dated [ ] and executed by our Controlling Shareholders in favour of our Company (for itself and as trustee for its subsidiaries) containing the indemnities more particularly referred to in Appendix V Statutory and General Information E. Other Information 1. Tax and other indemnities in this document the deed of non-competition dated [ ] 2018 and executed by our Controlling Shareholders in favour of our Company (for itself and as trustee for its subsidiaries) regarding certain non-competition undertakings, a summary of the principal terms of which is set out in Relationship with Controlling Shareholders in this document director(s) of our Company FY2016 the financial year ended 31 December 2016 FY2017 the financial year ended 31 December 2017 FY2018 the financial year ending 31 December 2018 GEM GEM Listing Rules General Rules of CCASS GEM of the Stock Exchange the Rules Governing the Listing of Securities on GEM, as amended, supplemented or otherwise modified from time to time the terms and conditions regulating the use of CCASS, as may be amended, supplemented or otherwise modified from time to time and where the context so permits, shall include the CCASS Operational Procedures 13

22 DEFINITIONS [REDACTED] Group, our Group, we, us or our [REDACTED] [REDACTED] HKFRSs HKICPA HKSCC HKSCC Nominees Hong Kong or HK Hong Kong Branch Share Registrar Hong Kong dollars or HKD or HK$ Hong Kong Legal Counsel Independent Third Party(ies) [REDACTED] our Company and its subsidiaries or any of them, or where the context so requires, in respect of the period before our Company becoming the holding company of its present subsidiaries, such subsidiaries as if they were subsidiaries of our Company at the relevant time or the businesses which have since been acquired or carried on by them or as the case may be their predecessors [REDACTED] [REDACTED] Hong Kong Financial Reporting Standards (including Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards and Interpretations) issued by the HKICPA The Hong Kong Institute of Certified Public Accountants Hong Kong Securities Clearing Company Limited HKSCC Nominees Limited, a wholly-owned subsidiary of HKSCC the Hong Kong Special Administrative Region of the PRC [REDACTED] Hong Kong dollars, the lawful currency of Hong Kong Mr. Chan Chung, barrister-at-law in Hong Kong, our legal adviser as to Hong Kong laws in relation to third party payments a person(s) or company(ies) who or which is/are independent of and not connected (within the meaning of the GEM Listing Rules) with any of the directors, chief executive or substantial shareholders of our Company or our subsidiaries or any of their respective associates 14

23 DEFINITIONS Latest Practicable Date [REDACTED] [REDACTED] Listing Division Macau Legal Advisers Memorandum or Memorandum of Association Mr. Chiu Ms. Wong Nomination Committee [REDACTED] [REDACTED] Peak Connect [REDACTED] [23 July 2018], being the latest practicable date prior to the printing of this document for the purpose of ascertaining certain information contained in this document prior to its publication [REDACTED] the date, expected to be on or about [REDACTED], on which our Shares are listed on GEM and from which date dealings in our Shares are permitted to commence on GEM the listing division of the Stock Exchange WICH Lawyers, our legal advisers as to Macau laws the amended and restated memorandum of association of our Company adopted on [ ] and as supplemented, amended or otherwise modified from time to time Mr. CHIU Ricky Tong ( ), an executive Director, the chairman of the Board, the chief executive officer of our Company, a Controlling Shareholder and the spouse of Ms. Wong Ms. WONG Sheng Ning Candace ( ), a non-executive Director, a Controlling Shareholder and the spouse of Mr. Chiu the nomination committee of our Board [REDACTED] [REDACTED] Peak Connect International Limited, a company incorporated in the BVI on 3 January 2017 with limited liability and a Controlling Shareholder [REDACTED] 15

24 DEFINITIONS [REDACTED] [REDACTED] [REDACTED] PRC or China PRC Legal Advisers [REDACTED] Profit Virtue [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] the People s Republic of China, excluding, for the purpose of this document, Hong Kong, Macau and Taiwan Jingtian & Gongcheng, our legal advisers as to PRC laws in relation to the [REDACTED] [REDACTED] Profit Virtue Worldwide Limited, a company incorporated in the BVI on 20 January 2017 with limited liability wholly-owned by Mr. Chiu, and a Controlling Shareholder [REDACTED] [REDACTED] [REDACTED] 16

25 DEFINITIONS [REDACTED] Regulation S Remuneration Committee Reorganisation RMB SFC SFO Share(s) Shareholder(s) [REDACTED] Share Option Scheme Sole Sponsor or [REDACTED] or [REDACTED] Stock Exchange subsidiary or subsidiary(ies) Substantial Shareholder(s) [REDACTED] Regulation S under the U.S. Securities Act the remuneration committee of our Board the corporate reorganisation of our Group in preparation for [REDACTED], details of which are set out in History, Reorganisation and Corporate Structure in this document Renminbi, the lawful currency of the PRC the Securities and Futures Commission of Hong Kong the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) as amended, supplemented or otherwise modified from time to time ordinary share(s) of HK$0.01 each in the share capital of our Company holder(s) of our Share(s) [REDACTED] the share option scheme conditionally adopted by our Company on [ ] 2018, a summary of the principal terms of which is set forth in Statutory and General Information D. Share Option Scheme in Appendix V to this document VBG Capital Limited, a corporation licensed to carry out Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities under the SFO The Stock Exchange of Hong Kong Limited has the meaning ascribed to it under the GEM Listing Rules has the meaning ascribed to it under the GEM Listing Rules 17