Garment Decorators, Chang Da Holdings, Re Delivery Form, Tag Business, Contribute More Than Half Of Revenue

APP was informed that in December 12th, Chang Da Holdings Limited (referred to as "Chang Da Holdings") submitted a listing application to the HKEx, which was the sole sponsor of the fund. This is the second time that it has applied for listing this year.

Chang Da holdings is mainly engaged in manufacturing and selling clothing labels and decorative products. Most of them are accessories that are attached to clothing products, such as tag, weaving Mark, seal mark and heat transfer printing products. The company started printing business in Hongkong in 1992, and subsequently set up major production facilities in China, Bangladesh and Vietnam, with a total construction area of about 37902 square meters, 3300 square meters and 2370 square meters respectively. In addition, the company has a support production line in the United States, with more than 400 machines, which can produce a wide range of clothing labels and decorative products. On the last feasible date, the company had a total of about 1080 employees.

China's clothing label market is highly dispersed. According to the Sullivan report, in 2018, the company ranked fifth in China's clothing label and decoration products manufacturing market, but its market share was only about 2%. Over the past record period, more than 70% of the proceeds came from the sales tag and the weaving Mark. The orders were mainly from Hongkong, China, Bangladesh, Turkey, Vietnam and the United States.

In the past 2016-2018 years, the company realized HK $241 million, HK $305 million and HK $372 million respectively, with a compound annual growth rate of 24%. The gross profit margin was 44.3%, 42.8% and 43.7% respectively. The company's profits should be HK $19 million 229 thousand, HK $24 million 208 thousand and HK $.

The sales tag product contributed most of the revenue to Chang Da holdings. During the above performance period, more than 50% of the revenue from the holding company came from the sale of the tag products, which were HK $142 million, HK $169 million and HK $197 million, respectively, accounting for about 58.6%, 55.3% and 52.9% of the total revenue of the company.

It is worth noting that the company's profitability has declined this year. In the 8 months ended August 31, 2019, the company's revenue was HK $227 million, down 10% from the same period last year, resulting in a decrease of about 10.2% from the orders of four major customers. But gross margins rose, up 4.5% to 48.2% compared with 2018. During the period, the profit attributable to the owners of the company was HK $11 million 330 thousand, down 54% from the same period last year. Over the same period, net cash income from operating activities also dropped by half, from HK $57 million 649 thousand to HK $27 million 965 thousand.

As for proceeds from fund-raising, the company will be used to build additional production plants in the Adamjee export processing zone, increase the capacity of the company in Bangladesh, use it as a plant purchase machine, and general working capital.

In terms of risk, Chang Da holdings relies on its main customers. Its revenue from five major customers has accounted for 30.8%, 28.4% and 24.5% of the total revenue of the company in the past three years. The largest customer accounts for 20.2%, 17.4% and 12.8% of the total revenue in the past three years. If the demand of its main customers falls in the future, the company's revenue will be greatly adversely affected, and this will also be reflected in 2019.