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Highlights

• A leading integrated B2B
  coffee and black tea solutions provider in Hong Kong, Macau and the PRC with 85-year experience,
  which covers the entire coffee and tea procurement, processing and distribution
  value chain
• A multi-channel distribution
  network that can reach approximately 60% of the food outlets in Hong Kong,
  which includes
  approximately up to 77.6%, 70.3% and 78.7% market coverage of fast food stores,
  Cha Chaan Tengs and cafes respectively, in 2016
• Developed a stable and diverse
  group of customers that include franchised business of McDonald’s in the PRC
  and Hong Kong , Yoshinoya, 7-Eleven , Cafe´ de Coral , Fairwood , Tsui Wah, Tai
  Hing and Spaghetti House
• Largest
  B2B coffee and black tea solutions provider in Hong Kong in 2016 with 24.5% of the
  market share in terms of B2B revenue, according to Frost & Sullivan report
• Business scope broadened to
  provide food supplies and frozen meat business commenced in Hong Kong and the PRC in 2013
• Entered
  into a strategic cooperation agreement in July 2017 with a leading food
  provider, NH Foods, to jointly develop the food products market in Hong Kong,
  Macau and the PRC
• Entered
  into a memorandum of understanding with F&N in April 2018 to explore business and
  product development opportunities for the supply, distribution, cobranded promotion and co-development
  of beverage products and/or beverage solutions

 

 

* Eliminated the effect of: (i)
listing expenses; (ii) consultancy fee incurred for change in the nature of
land use rights and formation of development plan of a piece of land in
Dongguan; (iii) legal fee incurred for settled trademark litigation; (iv)
impairment loss and write-down of inventories in  phasing out the current model of milk tea
machines; (v) write-down in value of coffee pod machines inventories; (vi)
impairment of trade receivables and write-down of inventories from discontinued
prune business in the PRC; (vii) dividend income from an available-for-sale
investment; (viii) interest income earned from the ultimate holding company;
(ix) compensation from settled litigation; (x) compensation received from a
supplier and excluding any tax effect related to the preceding judgements.

 

HONG
KONG, CHINA – Media OutReach – 27
April 2018 – Tsit Wing International
Holdings Limited (“Tsit Wing”, together with its subsidiaries, the “Group”;
stock code: 2119), an integrated B2B coffee and black tea solutions provider,
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 239,200,000 shares will be offered under the Global Offering, of which
215,280,000 Shares, or 90%, subject to adjustment and the Over-allotment
Option, will be offered by way of International Placing while the remaining
10%, or 23,920,000 Shares, subject to adjustment, will be offered under the
Hong Kong Public Offering
(including Employee
Preferential Offering).
The Offer
Price
per Offer
Share
is expected to be not less than HK$1.50 and not more than HK$2.19. The Public
Offer will commence on 30 April 2018 (Monday) and close at 12:00 noon on 4 May
2018 (Friday). The allotment result is expected to be announced on 10 May 2018
(Thursday). Dealings in Tsit Wing’s shares on the Main Board of the SEHK are
expected to commence at 9:00 a.m. on 11 May 2018 (Friday).

 

The company has entered
into cornerstone investment agreements with NH Foods Limited and Fraser and Neave, Limited (“F&N”). NH Foods
Limited, a Japanese corporation listed on the Tokyo Stock Exchange, has agreed
to subscribe for one billion Japanese Yen equivalent of shares at the Offer
Price, representing approximately 16.56% of the Offer Shares before exercise of
over-allotment option assuming the mid-point of the Offer Price. F&N which is listed on the Singapore Stock Exchange
has
agreed to subscribe for 32,000,000 shares at the Offer Price, representing
approximately 13.38% of the total offer shares before exercise of
over-allotment option.
Based
on the mid-point of the Offer Price, the total number of shares to be
subscribed by the Cornerstone Investors will represent approximately 29.94% of
Offer Shares before exercise of over-allotment option.

 

Assuming
an Offer Price of HK$1.84 per 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$149.7 million. Tsit Wing intends to use these net proceeds for
the following purposes: 1) approximately 40%
for strengthening the ability to provide food and beverage products solutions, in particular, potential
future business or share acquisitions, joint ventures or other strategic arrangements
to expand and enhance its product portfolio and to deepen its market penetration; 2) approximately
20%
for capital investments in relation to acquiring, expanding, streamlining or
upgrading its
manufacturing plants, premises, facilities, equipment or capabilities, with the
aim to enhance its
production efficiency or reduce its
operating costs, or expand its
product portfolio; 3) approximately 10% for expanding its food and beverage business in
Southeast Asia (including the costs of setting-up representative offices and commercially-viable strategic
acquisition); 4) approximately 10% for pursuing product
development and research, whether in-house or through collaboration with external
parties, and enhancing its
technological capabilities; 5) approximately 10%
for bolstering its
sales, marketing and advertising efforts to enhance brand recognition and
fortify brand loyalty for its
products and businesses; and 6) approximately 10%
for working capital and other general corporate purposes.

 

BOCI Asia
Limited is the Sole Global
Coordinator. BOCI Asia Limited and
BOSC International Company Limited are the Joint Sponsors. BOCI Asia Limited
and DBS Asia Capital Limited are the Joint Bookrunners and/or Joint Lead
Managers.

 

Business Overview

The
Group is a leading integrated B2B coffee and black tea solutions provider in
Hong Kong, Macau and the PRC.
The Group is a well-trusted brand that provides one-stop coffee and tea
solutions services to commercial customers that cover
the entire coffee and tea procurement, processing and distribution value chain,
with an expertise on Hong Kong-style milk tea. The Group has developed a
stable and diverse group of customers includes franchised business of
McDonald’s in the PRC and Hong Kong, Yoshinoya, 7-Eleven, Cafe´ de Coral,
Fairwood, Tsui Wah, Tai Hing and Spaghetti House. The diversified customer base gives us
a multi-channel distribution network that can reach approximately 60% of the
food outlets in Hong Kong in
2016, which include approximately up to 77.6%, 70.3% and
78.7% market coverage of fast food stores, Cha Chaan Tengs and cafes
respectively. In 2017, coffee
sold by the Group can be made into 253.3 million to 337.7
million cups of coffee per year and between 693,800 to 925,100 cups of coffee
per day (assuming nine to 12 grams of coffee is applied to produce each cup),
while tea sold by us can be made into 302.4 million to 403.2 million cups of
milk tea per year and 828,500 to 1,104,600 cups of milk tea per day (assuming
nine to 12 grams of tea is applied to produce each cup of milk tea).

 

The
Group broadened its
business scope to provide food supplies and commenced its frozen meat business in Hong
Kong and the PRC
in 2013, and its
frozen processed food business in Hong Kong in 2015. In July 2017, the Group
entered into a strategic cooperation agreement with a leading food provider, NH
Foods, which has
operations in about 90 locations in 19 countries and regions
to jointly develop the food products market in Hong Kong, Macau and the PRC.
The management believes that Tsit Wing’s market knowledge and well-established
customer base combined with NH Foods’s expertise in food products, experience
and resource strengthens its
product portfolio and positions
the Group well to develop targeted markets in Hong Kong, Macau and the PRC. The
Group entered into a memorandum of understanding with F&N in April 2018 to
explore business and product development opportunities for the supply,
distribution, cobranded promotion and co-development of beverage products
and/or beverage solutions.

 

Revenue derived from the Group’s beverage
solutions increased from HK$639.2 million for the year ended December 31, 2016 to HK$711.3 million for the
year ended December 31, 2017. It was
primarily contributed by a growth in the volume of its coffee, tea and milk
products, and the increase in the average selling price of its coffee and tea products. Revenue
derived from food products increased from HK$210.5 million for the year ended
December 31, 2016 to HK$243.3 million for the year ended December 31, 2017.
Changes mainly reflect variations to the sales volume of the products and the
growth in sales to existing customers.

 

Competitive Strengths

1)


A leading
and trusted integrated B2B coffee and black tea solutions provider in Hong
Kong, Macau and the PRC with 85 years of heritage

Leveraging off its wealth of market knowledge and
product know-how, the Group provides its customers a one-stop service starting
from market analysis and recipe development through sourcing, production,
marketing and after sales services. The Group has developed a stable and
diverse group of customers that include franchised business of McDonald’s in
the PRC and Hong Kong, Yoshinoya, 7-Eleven, Cafe´ de Coral, Fairwood, Tsui Wah,
Tai Hing and Spaghetti House. The Group has also been awarded the Hong Kong top brand mark
since 2009 and served as the official coffee and tea provider at 2008 Beijing
Olympics, 2010 Guangzhou Asia Games and 2011 Shenzhen Summer Universiade Games.
According to the survey conducted by Frost & Sullivan, Tsit
Wing is the most
well-recognized top quality coffee and black tea brand among restaurants in
Hong Kong.

 

2)


Strong
beverage customizing capability and an established food products business
supported by a worldwide sourcing network

As a trusted partner, the Group actively approaches
its customers to form solutions that transfer their beverage concepts into
customized products that suit the tastes of targeted consumers economically.
The Group remains committed to ensuring that solutions it forms with customers
have the desired results through a comprehensive after sales service. Tsit Wing
regularly engages its customers to discuss the latest market preferences and
best practices that it assembles through its diverse sales and distribution
venues, and to collect their feedback on the existing products and their new
beverage concepts. In addition, Tsit Wing believes its well-established
connections to renowned suppliers have contributed to its success as an
integrated coffee and tea solutions provider.

3)


Stable
and diversified customer base supported by a well-established multi-channel
distribution network with proven ability to capture new markets

Supported by a pre-delivery system, a
well-established logistics team, and supplemented by distributors with local
market knowledge, the Group have been able to maintain a delivery service of
within 24 hours to approximately 750 delivery points in Hong Kong on a daily
basis. Leveraging off its established distribution network for beverage
products, the Group has expanded its frozen processed food offering to
well-established fast food chains and Cha Chaan Teng to which it previously
only provided beverage products.

 

4)


Strong
track record that is enhanced by integration of advanced quality control and
data analysis system that also facilitates business development

The Group’s stringent quality control process
starts with sourcing from suppliers with internationally-accredited quality
certifications, which is supplemented with scientific tests and online
monitoring to further ensure product quality. Also, the Group has adopted an integrated business
intelligence system that connects different segments of its operation. Through
such system, the Group can efficiently coordinate its production planning,
supply chain management, business analysis management and financial reporting
management. This ensures the Group to make appropriate operational adjustments
in response to market conditions and customer needs and forecast future demands
more accurately. The Group has amassed a comprehensive database of food and
beverage outlets in Hong Kong which is officially updated annually.

 

The Group’s stringent quality control process
starts with sourcing from suppliers with internationally-accredited quality
certifications, and journeys through its operations in Hong Kong and the PRC
under the strict commitment to internationally recognized standards, including
HACCP, ISO 9001 : 2008, ISO 14001 : 2004 and ISO 22000: 2005.

 

5)


Experienced
and high caliber management team with valuable know-how supported by full adoption
of modern management system

The chairman and Executive Director, Mr. Peter T.T.
Wong, has over 38 years of management and industrial experience in the food and
beverage industry. Mr. Wong is the architect behind Tsit Wing’s production
modernization that included installation of automated equipment, and capacity
expansion that was instrumental to its business growth. The Group’s experienced
senior management team comprises of industry experts with valuable know-how and
more than ten years of experience in the food and beverage industry on average.
They have developed extensive experience in raw material procurement, product
development and distribution management, which has all contributed to better
operations and cost management.

 

BUSINESS STRATEGIES

1)


Further
strengthen its leading position in the integrated B2B coffee and black tea
solutions market in Hong Kong, deepen its penetration in the PRC, expand its
business in Southeast

Asia, and enhance its brand recognition and
awareness

Tsit Wing believes that a commitment to improve its
solution offering capabilities is crucial to maintaining its leading market
position. It will continue to leverage off its global sourcing capability and
further invest in its market-oriented product development efforts. At the same
time, leveraging off the wealth of industry knowledge that it has accumulated
and continue to garner in its day-to-day operations, the Group remains
committed to building a know-how data base that will help formulate integrated
coffee and tea solutions even more efficiently, and in turn improves the
quality of its service in the future. The Group also plans to expand its sales
channels through increased coverage of supermarkets, luxury hotels, fast food
chains and airlines. It intends to further enhance the brand recognition and
awareness by devoting more resources in promotional and marketing activities.

 

The Group also seeks to deepen its market
penetration and enhance its brand recognition and awareness in the PRC. It
intends to expand its sales channels that are believed to have relatively
higher growth potential, particularly the Pearl River Delta in the near term
and the Yangtze River Delta in the long-run. During the Track Record Period,
its sales efforts mainly focused in the first and second tier cities in eastern
and southern China, further grow its sales and distribution network into other
major cities with strong growth potential and seek cross-selling opportunities
of its other products.

 

2)


Continue
to strengthen its frozen meat and frozen processed food products business and expand
its product offerings

The Group intends to actively expand its product
offerings to provide the convenience of one-stop purchasing for its customers
and expand its sales channel to food and beverage providers. The Group also aims
to further expand its business in the frozen processed food markets, enhances its
ability to procure customized frozen processed food and integrates its frozen meat
and frozen processed food products into customer’s central kitchen. The Group
entered into a strategic cooperation agreement with NH Foods, a leading food
provider with operations in about 90 locations in 19 countries and regions, in
July 2017 to jointly develop the food products market in Hong Kong, Macau and
the PRC. Also, the Group entered into a memorandum of understanding with
F&N in April 2018 to explore business and product development opportunities
for the supply, distribution, cobranded promotion and co-development of
beverage products and/or beverage solutions.

 

3)


Continue
to strengthen its sourcing capability and strengthen its vendor selection
process

The Group seeks to continue to strengthen both the
breadth and the depth of its worldwide sourcing network by engaging more
globally recognized suppliers while deepening its relationship with existing
supply channels. It strives to identify more materials that could be applied to
its customized solutions and allow the Group to offer a comprehensive portfolio
of products. Tsit Wing will also continue to monitor market trend and seek raw
materials that can be applied to form food and beverage flavors that best meet
latest consumer preferences. The Group also strives to continue to build a
healthy pool of suppliers that can ensure stable and quality supply at
competitive price. It intends to strengthen its vendor selection process to
ensure only qualified new suppliers are engaged and existing suppliers are evaluated
regularly.

 

4)


Upgrade
its production facilities and further enhance its production capabilities.

The Group intends to (i) acquire new coffee
machines for our customers, (ii) upgrade the coffee roasters in our Hong Kong
facility, (iii) set up a warehouse and renovate facilities, and (iv) acquire
additional machinery including equipment used to detect foreign objects, equipment
for better working environment for our employees and packaging equipment with
functions equipped to cater to small-size packaging for tea (which is not
interchangeable for coffee) to increase the products portfolio of the Company. Meanwhile,
the Group will continue to advance its quality control equipment and warehouse
capabilities to support the expansion of production.

 

About
Tsit Wing International Holdings Limited

Tsit Wing isa leading integrated B2B coffee and black tea
solutions provider in Hong Kong, Macau and the PRC with 85-year heritage. In 2017, coffee sold by the Group
can be made into most 337.7 million cups of coffee per year; tea sold can be
made into most 403.2 million cups of milk tea per year. Tsit Wing commenced its
frozen meat business in Hong Kong and the PRC from 2013.

 

According
to the Frost & Sullivan Report, Tsit Wing is the largest B2B coffee and black tea solutions provider in
Hong Kong in 2016 with 24.5% of the market share in terms of B2B revenue.