Palace Banquet Holdings Limited to raise a maximum of approximately HK$187.5 million by way of public offer and placing (excluding Sale Shares)

Highlights

• A full-service restaurant group in Hong Kong offering Cantonese dining service and banquet service
• Providing one-stop wedding banquet service
• Ranked third amongst the Chinese full-service restaurant groups in the Hong Kong banquet market in 2017, with a market share of approximately 5.0%*[1]
• Currently operates 20 Chinese restaurants under two brand names, namely "Palace (煌府)" and "Royal Courtyard (煌苑)"
• For the years ended 31 March 2016, 2017 and 2018, revenue was approximately HK$596.0 million, HK$635.1 million and HK$770.1 million, respectively, whilst net profit was approximately HK$39.9 million, HK$40.3 million and HK$53.0 million

Financial Highlights

HONG KONG, CHINA - Media OutReach - 30 January 2019 - Palace Banquet Holdings Limited ("Palace Banquet", together with its subsidiaries, the "Group"; stock code: 1703),a full-service restaurant group in Hong Kong offering Cantonese dining service and banquet service, announces the details of its plan to list on the Main Board of The Stock Exchange for Hong Kong Limited ("SEHK") today.

A total of 300,000,000 shares will be offered under the Share Offer, of which 270,000,000 Shares or 90% (comprising 220,000,000 new Shares and 50,000,000 Sale Shares, subject to re-allocation and the Over-allotment Option), will be offered by way of Placing; while the remaining 10%, or 30,000,000 Shares (subject to re-allocation) will be offered under the Public Offer. The Offer Price per Offer Share is expected to be not less than HK$0.50 and not more than HK$0.75. The Public Offer will commence on 31 January 2019 (Thursday) and close at 12:00 noon on 8 February 2019 (Friday). The allotment result is expected to be announced on 14 February 2019 (Thursday). Dealings in Palace Banquet's shares on the Main Board of the SEHK are expected to commence on 15 February 2019 (Friday).

Assuming an Offer Price of HK$0.625 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$122.1 million. Palace Banquet intends to use these net proceeds for the following purposes: 1) approximately 76.1% for expanding its restaurant network and geographic coverage by opening 8 new restaurants in Hong Kong by the year ending 31 March 2021; 2) approximately 14.1% for renovation of its existing restaurants; 3) approximately 5.0% for promoting its brands and wedding banquet service; and 4) approximately 4.8% for additional working capital, strategic investment and other general corporate purposes.

Shenwan Hongyuan Capital (H.K.) Limited is the Sole Sponsor. Shenwan Hongyuan Capital (H.K.) Limited and Opus Capital Limited are the Joint Global Coordinators. Shenwan Hongyuan Capital (H.K.) Limited, Opus Capital Limited and Haitong International Securities Company Limited are the Joint Bookrunners and Joint Lead Managers. Elstone Securities Limited and Great Roc Capital Securities Limited are the Co-Lead Managers.

Industry Overview

According to the Frost & Sullivan Report, the banquet market in Hong Kong has gradually recovered as the year of 2017 has double spring and leap month, which traditional Chinese people consider good fortune. The market is estimated to achieve a total revenue of HK$8.7 billion by 2022, representing a CAGR of approximately 2.1% from 2017 to 2022. The Group ranked third amongst the Chinese full-service restaurant groups in the Hong Kong banquet market in 2017 in terms of revenue, with a market share of approximately 5.0%.

Wedding banquet accounts for the largest proportion in the total banquet market. The market is forecasted to be relatively stable in the coming few years, with higher average spending on wedding banquets. The per capita average spending on wedding banquets is expected to reach approximately HK$175,000 in 2022, representing an increase of about 8.7% from HK$161,000 thousand in 2017.

Business Overview

The Group is a full-service restaurant group in Hong Kong offering Cantonese dining service and banquet service, including wedding banquet service. Currently, the Group operates 20 Chinese full-service restaurants under two brand names, namely brands with the word "Palace (煌府)" and "Royal Courtyard (煌苑)". All of its restaurants are strategically located at shopping mall, commercial complex or on-street shops at prime locations with convenient access to public transport, in particular railway station. The Group offers services including wedding invitation card design, wedding cake and transportation pick-up, subject to the wedding banquet packages selected. Its restaurants are specially designed for hosting banquets and events, with enhanced interior features such as 100-feet passage from the wedding stage to the middle of the banquet hall, revolving stage, passenger-carrying-gondola, chapel mock-ups and lighting effect.

During the Track Record Period, its revenue was mainly generated from: (1) banquet service for events, including weddings, birthday parties, graduation dinners, babies' hundred days celebration, corporate annual dinners and other celebration dinners; and (2) dining service offering Cantonese cuisine. According to the Frost & Sullivan Report, the Group ranked third amongst the Chinese full-service restaurants in the Hong Kong banquet market with a market share of approximately 5.0%, and ranked seventh among the top 10 market players in the Hong Kong full-service dining market with a market share of approximately 1.7%, in terms of revenue in 2017.

Competitive Strengths

1)    Providing one-stop wedding banquet service

The Group provides wedding banquet customers with one-stop wedding banquet services for their wedding planning and preparation process solutions. Its restaurants are specially designed for hosting banquets with unique theme and enhanced interior features. A wedding planning manager will be assigned to provide service of wedding planning and assist the execution process to its wedding banquet customers. The Group will constantly keep abreast of current trends in wedding banquet styles to serve and attract customers requiring one-stop wedding banquet service.

2)    Diversified services and menu offerings

The Group has the capability to provide diversified dining services to its customers, including Cantonese cuisine and other banquet service for events such as birthday parties, graduation dinners, babies' hundred days celebration, corporate annual dinners and other celebration dinners. The Group can thus maintain its seat turnover rate in low season for wedding banquet and its restaurants can be accustomed to residential districts, which have greater demand for dining service. The Group may customise the set menus at its customers' special request and is able to attract different customers ranging from families, couples and companies.

3)    Strategic location of its restaurants

Before opening a new restaurant, the Group will consider a number of factors, which include, amongst others, visibility and accessibility to customers, flow and level of pedestrian traffic and distance to public transport. All of its existing restaurants are located at walkable distance to railway stations. The Group strategically opened restaurants in different districts of Hong Kong to cover a broad customer base and expand market penetration.

4)    Experienced and stable management team

The Group has a strong and experienced management team with extensive experience in catering industry and restaurant management. Mr. Chan Shou Ming, the Group's executive Director and the chairman of the Board has close to 30 years of experience in the catering industry and specialised in providing banquet services. Ms. Chen Xiao Ping, the Group's chief executive officer and executive Director, who is responsible for building and managing the brand image and overseeing the overall operations of the Group, has over 20 years of experience in the catering industry.

BUSINESS STRATEGIES

1)    Expanding its restaurant network and geographic coverage

The Group intends to further expand its current restaurant network by opening 4 new restaurants by 31 March 2020 and another 4 new restaurants by 31 March 2021, so as to increase the Group's market share and optimise geographic coverage. It is believed that the expansion plan will: (i) expand the Group's restaurant network into new geographical locations and thus increase its market shares and geographic coverage; (ii) broaden its customer base by accustoming its new restaurants to residential districts and new locations; (iii) increase its sales and brand recognition; and (iv) enhance cost efficiency by strengthening bargaining power with suppliers and landlords.

2)    Renovating its existing restaurants to maintain competitiveness

According to the Frost & Sullivan Report, wedding venue is one of the factors that new couples would mostly consider before holding their weddings. Venues that are newly decorated or refurnished with better environment and design are popular amongst new couples. The Group plans to carry out renovations in 8 of its existing restaurants by the year ending 31 March 2020, to maintain its competitiveness, attract more customer traffic and hence increase its revenue.

3)    Promoting its brands and wedding banquet service

The Group plans to further promote its brands to attract guest traffic and increase/maintain its market share. The Group's key marketing strategies include: attending wedding exhibitions, traditional advertisements and promotional activities, social media, sponsorships, spokesperson as well as membership programme.

About the Group

Palace Banquet Holdings Limited is a full-service restaurant group in Hong Kong offering Cantonese dining service and banquet service, including one-stop wedding banquet service. Currently, the Group operates 20 Chinese restaurants under two brand names, namely "Palace (煌府)" and "Royal Courtyard (煌苑)". According to the Frost & Sullivan Report, the Group ranked the third amongst the Chinese full-service restaurant groups in the Hong Kong banquet market with a market share of approximately 5.0%. For the years ended 31 March 2016, 2017 and 2018, its revenue was approximately HK$596.0 million, HK$635.1 million and HK$770.1 million, respectively, whilst its net profit was approximately HK$39.9 million, HK$40.3 million and HK$53.0 million in the same period.