Offering Details

The Group intends to offer an aggregate of 200,000,000 Shares, of which 10% by way of Public Offer Shares (subject to re-allocation) and 90% by Placing Shares (subject to re-allocation). The indicative Offer Price range is between HK$0.30 and HK$0.40 per Offer Share. Assuming an Offer Price of HK$0.35 per Offer Share (being the mid-point of the indicative Offer Price range), the gross proceeds from the Share Offer is estimated to be approximately HK$70.0 million.

The Public Offer commences at 9:00 a.m. on 12 June 2018 (Tuesday) and ends at 12:00 noon on 15 June 2018 (Friday). The final offer price and the allotment results are expected to be announced on 26 June 2018 (Tuesday). Trading of shares is expected to commence on the SEHK on 27 June 2018 (Wednesday), under the stock code 8146 and in board lots of 10,000 Shares each.

Southwest Securities (HK) Capital Limited is the Sole Sponsor. Joint Bookrunners and Joint Lead Managers are Southwest Securities (HK) Brokerage Limited, Emperor Securities Limited and Success Securities Limited.

Investment Highlights

Award-winning "Grace Vineyard" brand and quality wine products with high profile and public awareness in the PRC Grace Wine has successfully established the brand "Grace Vineyard" as an icon of quality, value-for-money wine products in the PRC, with the largest market share of 14.9% in Shanxi in terms of retail sales revenue in 2016. With over 20-years in history, the Group has been recognised with a number of domestic and international awards in the industry. To name a few, "Grace Vineyard" was selected as a "Top Shanxi brand" by the Shanxi Administration for Industry and Commerce, and was also named as the "Winery with Greatest Market Influence" by La Revue du Vin de France. Moreover, its "Tasya's Reserve Cabernet Sauvignon 2014" was awarded a commended award at the Decanter Asia Wine Awards 2017. The strong brand value and recognitions received was also acknowledged by the Harvard Business School as a case study in its curriculum.

Diverse wine products portfolio catering to a broad range of customer pricing preferencesThe Group has diverse wine products portfolio primarily comprises red wine series which can be broadly categorised into the higher-end wine series and the entry-level wine series that can cater to a broad range of customers with different quality and pricing preferences. Furthermore, the Group makes white wine and sparkling wine from time to time as well as seasonal series and special blend of red wine to suit market demands and diversified tastes and preferences. The Group's diversified range of wine product portfolio enabled it to increase its market share and respond to market trends and demands.

Strategic presence in Shanxi and Ningxia provides a vertically integrated production chain and the ability to growThe Group has two wineries strategically located in Shanxi and Ningxia respectively, one with a GFA of approximately 29,064 sq.m. and a wine-making capacity of 2,200 tonnes, and one expected to have GFA of 72,800 sq.m. and a wine-making capacity of 390 tonnes. Both cities are considered prominent wine-making regions in the PRC with suitable climate and favourable national and regional government policies to encourage, support and incentivise wine-making business. The Group self-cultivates grapes grown in their Shanxi vineyard, which provides a vertically-integrated production chain and gives greater control over product and raw material quality that are particular important for making higher-end wine portfolio.

Reliable network of distributors and growing online sales capability Grace Wine has a network of 13 distributors act as their principal sales channel and has a long lasting and commercially viable relationship with some of the key distributors. In particular, collaboration with their sole and exclusive distributor Shanxi Jiajia has been more than 12 years. In addition, the Group operated online sales virtual space in the PRC such as JD.com and TMall, giving the Group access to the growingly popular e-commerce in the PRC. During FY2017, the revenue contribution from online sales was approximately 4.5%.

Dedicated and responsive marketing efforts to raise brand image The Group has frequently promoted "Grace Vineyard" by various marketing efforts, for instance participating in industry fairs and exhibition, inviting media, sommeliers and social elites to wine tasting events and wine pairing dinners to raise brand and product awareness. Moreover, a key initiative is the operation of the Group's "Chateau", an accommodation facility at its Shanxi winery which is to promote wine tourism and also raise the brand and profile of "Grace Vineyard". Additionally, the Group invites "key opinion leaders" to promote wine products through blogs and social media sites to strengthen online sales.

Energetic management and technical teams with in-depth experience and exposure to international wine making businesses Grace Wine is led by an energetic management team with passion on wine-making business and constantly strives to improve and respond to emerging industry trends. Furthermore, a strong technical and operational team who oversees grape cultivation, wine-making and quality assurance processes, are believed to have the professionalism and expertise to give the Group the ability to make quality, value-for-money wine products.

Future Development Strategies

According to the F&S Report, wine consumption in the PRC is expected to increase at a CAGR of 6.8% from 2016 to 2021. Thus, the wine market in the PRC will continue to recover and grow in line with expanding population, increasing urbanisation, uplift of living standards and growing popularity of wine consumption in the PRC.

Grace Wine's first phase construction of Ningxia Winery was completed in December 2017 and will become operational before the grape harvest season in 2018, giving the Group 390 tonnes or a 18.0% increase in wine-making capacity. The second phase construction of Ningxia Winery is expected to complete by the end of 2020, giving the Group a further 260 tonnes or a 12% increase in wine-making capacity. Ningxia Winery is expected to bring a total number of 200 wine-making tanks by the end of 2020, giving an additional estimated wine-making capacity of 650 tonnes of wine or a grape-processing capacity of 1,000 tonnes of grapes per year, allowing the Group to capture the projected growth in the PRC wine market and increase market share.

Furthermore, Grace Wine will also diversify its wine product portfolio and market responsive optimisation to suit customer preferences and grow market share. The Group will further enhance the awareness of its "Grace Vineyard" brand to broaden its customer base and extend its product outreach by optimising the Group's distribution model through adding more quality distributors. Additionally, the Group will continue to proactively pursue and expand its online sales capability through scalable third-party operated online virtual space in the PRC such as JD.com and TMall, which allow the Group to promote, sell and market its products in a cost-effective manner.

Use of ProceedsAssuming an Offer Price of HK$0.35 per Offer Share (being the mid-point of the indicative Offer Price range), the Group intends to use the net proceeds on the following:

Items / Approximate amount (%)Construction of the second phase of Ningxia Winery: 45.3%Purchase of plants and equipment for the second phase of Ningxia Winery: 20.5%Initial production costs of the first phase of Ningxia Winery: 20.2%Sales and marketing expenses: 9.1%General working capital: 4.9%

About Grace Wine Holdings LimitedGrace Wine Holdings Limited is an award-winning, established wine maker based in Shanxi. It is committed to make quality, value for money wine under the brand of "Grace Vineyard" and cater to a wide range of customer tastes and pricing preferences since 1997. It is the largest wine maker in Shanxi with 14.9% market share in terms of retail sales revenue in 2016. "Grace Vineyard" was selected as "Top Shanxi Brand", and its wine products received a gold medal and the "Best Value for Money" award from La Revue du Vin de France, Chinese Edition, in 2017. Their wine products are also well-received by sommeliers in the PRC and Hong Kong and have been served in a number of multi-national luxury hotel chains.

Topic: Press release summarySectors: Daily Finance, Daily News^[1][2] http://www.acnnewswire.com From the Asia Corporate News Network

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References

1. ^{^} Daily Finance (www.acnnewswire.com)
2. ^{^} Daily News (www.acnnewswire.com)