F-1/A: Creative Global Technology Holdings Eyes Nasdaq Listing with 2 Million Share IPO

Creative Global Technology Holdings Limited is seeking to list on the Nasdaq Capital Market through an initial public offering of 2 million ordinary shares, while a selling shareholder plans to offer an additional 2 million shares.

Summary

• Creative Global Technology Holdings Limited, a Cayman Islands holding company, is planning an initial public offering of 2,000,000 ordinary shares.
• The company expects the IPO price to be between US$4.00 and US$5.00 per share.
• A selling shareholder, CHSZ Holdings Limited, intends to offer an additional 2,000,000 ordinary shares through a Resale Prospectus.
• The company will not receive any proceeds from the sale of shares by the selling shareholder.
• Following the offerings, public shareholders will hold approximately 18.18% of the ordinary shares, assuming the underwriters do not exercise their over-allotment option.
• The company has reserved the symbol CGTH for its Nasdaq listing, which is conditional upon Nasdaq's final approval.
• After the offerings, Mr. Shangzhao (Cizar) Hong, the CEO, will retain approximately 81.82% of the ordinary shares and voting power, leading to the company being classified as a Controlled Company under Nasdaq rules.
• The company conducts its operations primarily in Hong Kong through its subsidiary, Creative Global Technology Limited (CGTHK).
• The company sources and resells recycled consumer electronic devices, mainly smartphones, tablets, and laptops.
• For the year ended September 30, 2023, the company generated revenue of approximately US$50.2 million and net income of approximately US$3.17 million.
• For the year ended September 30, 2022, the company generated revenue of approximately US$27.65 million and net income of approximately US$3.35 million.

Sentiment

Score: 6

Explanation: The document presents a mixed sentiment. While the company shows revenue growth and expansion plans, there are also risks related to market competition, regulatory uncertainties, and potential economic instability in Hong Kong. The decrease in net income despite revenue growth is also a concern.

Positives

• The company has a solid client base and supplier network.
• The company maintains a high turnover rate of its inventory.
• The company has an experienced and dedicated management team.
• The company benefits from its operation scale from preferable prices and payment terms with customers and suppliers.
• The company is located in Hong Kong, a major hub for the global recycled electronic devices industry.

Negatives

• The company is not receiving any proceeds from the sale of shares by the selling shareholder.
• The company's Nasdaq listing is contingent on final approval.
• The CEO will retain significant control, leading to the company being classified as a Controlled Company under Nasdaq rules.
• The company's operations are concentrated in Hong Kong, making it vulnerable to regional economic and political events.
• The company relies heavily on Apple products, making it susceptible to disruptions in Apple's production or supply chain.

Risks

• The company's business model may not continue to be successful or achieve wide acceptance.
• The company may fail to attract and engage consumers, find suitable suppliers, or involve other participants in the pre-owned consumer electronic devices value chain.
• The company may be unable to effectively and accurately inspect, grade, and price pre-owned goods.
• The price margin between the company's collection and resale of pre-owned consumer electronic devices may fluctuate or decline.
• The company may incur liability for stolen products sold by it or counterfeit, infringing, illegal, or unauthorized products sold by it.
• The company's business is dependent on the government's policy on the Hong Kong mobile telecom industry.
• The company may be affected by the currency peg system in Hong Kong.
• It may be difficult to acquire jurisdiction and enforce liabilities against the company, its officers, directors, and assets based in Hong Kong.
• Potential political and economic instability in Hong Kong may adversely impact the company's results of operations.
• The company's Ordinary Shares may be delisted and prohibited from being traded under the Holding Foreign Companies Accountable Act if the PCAOB is unable to inspect its auditors for two consecutive years.
• There has been no previous public market for the company's Ordinary Shares, and an active trading market may not develop.
• The market price for the company's Ordinary Shares may be volatile.
• The estimates of market opportunity, forecasts of market growth included in this prospectus may prove to be inaccurate.

Future Outlook

The company plans to expand its wholesale business, develop a wholesale auction market, expand its retail business, expand into strategic overseas markets, and build a repair and refurbishment factory.

Industry Context

The company operates in the rapidly evolving pre-owned consumer electronic devices industry, which is characterized by a growing emphasis on circular economy principles and sustainability. The industry is competitive and fragmented, with increasing demand for quality control and modernized warehouse management.

Comparison to Industry Standards

• The Frost & Sullivan Report indicates that the global market size of pre-owned electronic devices by wholesale value has increased steadily from US$32.0 billion to US$48.9 billion during 2017 to 2021, a CAGR of 11.1%.
• The Frost & Sullivan Report projects the global market to grow at a CAGR of 9.7% between 2022 and 2026, reaching US$77.1 billion in 2026.
• The Frost & Sullivan Report indicates that the wholesale value of recycled consumer devices in Hong Kong increased from HK$ 21.8 billion (approximately US$2.78 billion) in 2017 to HK$ 34.3 billion (approximately US$4.37 billion) in 2021, a CAGR of 12.0%.
• The Frost & Sullivan Report projects the wholesale value of pre-owned electronic devices in Hong Kong to reach HK$55.9 billion in 2026, at a CAGR of 10.2% from 2022 to 2026.
• Key competitors in the Hong Kong market include Guang Yi Co. Ltd., Brightway Trading Co., and CommNet Telecom Limited.

Related Party Transactions

• The company had short-term loans due to Mr. Shangzhao (Cizar) Hong to provide the company's working capital needs, and they are interest-free, unsecured and repayable on demand.
• As of September 30, 2023, there is no outstanding balance due to Mr. Hong.

Stakeholder Impact

• Shareholders will be impacted by the potential dilution of their ownership due to the issuance of new shares.
• Shareholders will be impacted by the company's dividend policy, which does not anticipate paying any cash dividends in the foreseeable future.
• Employees may benefit from the company's plans to recruit additional personnel.
• Customers may benefit from the company's plans to expand its product portfolio and improve its services.
• The company's commitment to ESG and compliance may enhance its reputation and attract environmentally conscious customers and investors.

Next Steps

• The company needs to secure final approval for its Nasdaq listing.
• The company needs to execute its plans for expanding its wholesale and retail businesses.
• The company needs to monitor and adapt to changes in the global supply chain and economic conditions.

Key Dates

Keywords

recycled consumer electronic devices, Hong Kong, IPO, Nasdaq, ordinary shares, selling shareholder, CGTHK, pre-owned, listing, technology