F-1/A: Happy City Holdings Files for IPO, Aiming to List on Nasdaq

Happy City Holdings, a Hong Kong-based restaurant operator, has filed an amended registration statement for its initial public offering (IPO) of 1,000,000 Class A ordinary shares, with plans to list on the Nasdaq Capital Market under the ticker symbol HCHL.

Summary

• Happy City Holdings Limited, a restaurant operator based in Hong Kong, has filed an amendment to its F-1 registration statement for an IPO.
• The company plans to offer 1,000,000 Class A ordinary shares, representing approximately 14.29% of the Class A Ordinary Shares following completion of the Offering.
• The expected initial public offering price is between US$5.00 and US$7.00 per share.
• The company intends to list its Class A Ordinary Shares on the Nasdaq Capital Market under the symbol HCHL.
• Happy City's share structure includes Class A Ordinary Shares (one vote per share) and Class B Ordinary Shares (twenty votes per share), with Happy City Group Limited retaining significant voting control.
• The company operates three all-you-can-eat hotpot restaurants in Hong Kong under the brands Thai Pot and Gyu! Gyu! Shabu Shabu.
• The company's revenue increased by 22.8% from US$6,754,350 in 2023 to US$8,295,084 in 2024, with a net income of US$1,319,697 in 2024 compared to a net loss of US$1,085,777 in 2023.
• The company faces risks associated with operating in Hong Kong, including potential intervention by the PRC government and uncertainties regarding PRC laws and regulations.
• The company's auditor has expressed substantial doubt about its ability to continue as a going concern.
• The company intends to use the net proceeds from the IPO for business expansion in Hong Kong and Southeast Asia, as well as for working capital and general corporate purposes.

Sentiment

Score: 6

Explanation: The document presents a mixed sentiment. While there's positive revenue growth and a shift to net income, concerns about going concern, regulatory risks, and concentrated voting control temper the overall outlook.

Positives

• Revenue increased by 22.8% to US$8,295,084 in 2024.
• The company achieved net income of US$1,319,697 in 2024, a significant improvement from the net loss in 2023.
• The company has a unique brand image that is recognized in Hong Kong.
• The company's restaurants are strategically situated in various prime locations in Hong Kong.
• The company is committed to provide safe, fresh, and quality food ingredient to our customers.
• The company has established and stable relationship with our major suppliers.
• The company's management team are highly experienced in the catering industry and restaurant management

Negatives

• The company's auditor has expressed substantial doubt about its ability to continue as a going concern.
• The company had net current liabilities of US$918,271 as of August 31, 2024.
• Happy City Group Limited will retain significant voting control post-IPO with approximately 97.17% of the aggregate voting power.
• The company faces risks associated with operating in Hong Kong and potential intervention by the PRC government.

Risks

• The company's auditor has expressed substantial doubt about its ability to continue as a going concern.
• The company faces significant regulatory, liquidity, and enforcement risks and uncertainties relating to doing business in the PRC in general.
• The PRC government may intervene or influence the current and future operations in Hong Kong at any time.
• There remain some uncertainties as to whether we will be required to obtain approvals from the PRC authorities to list on a U.S. exchange and offer securities in the future, and if required, we cannot assure you that we will be able to obtain such approval.
• If the PRC government chooses to extend the oversight and control over offerings that are conducted overseas and/or foreign investment in Mainland China-based issuers to Hong Kong-based issuers, such action may significantly limit or completely hinder our ability to offer or continue to offer Class A Ordinary Shares to investors and cause the value of our Class A Ordinary Shares to significantly decline or be worthless.
• The enactment of the law of the PRC on Safeguarding National Security in the Hong Kong Special Administrative Region (the Hong Kong National Security Law) could impact our Hong Kong subsidiaries, which represent substantially all of our business.
• There are political risks associated with conducting business in Hong Kong.
• Our Class A Ordinary Shares may be prohibited from being traded on a national exchange under the Holding Foreign Companies Accountable Act if the PCAOB is unable to inspect our auditors.

Future Outlook

The company intends to use the net proceeds of this Offering primarily for business expansion in Hong Kong and Southeast Asia region and working capital and other general corporate purposes.

Industry Context

The hotpot restaurant market in Hong Kong is highly competitive and we may not successfully compete against our competitors.

Comparison to Industry Standards

• The Group is the only top 10 specialty hotpot restaurant chains in Hong Kong that offers Thai-style hotpot.
• The overall market size of the catering services industry is expected to grow at a compound annual growth rate (CAGR) of approximately 4.3% from 2025 to 2029, potentially reaching HK$137.7 billion by August 2029.
• The overall market size of hotpot restaurant market in Hong Kong is expected to grow at a CAGR of approximately 5.4% from 2025 to 2029, potentially reaching HK$9.9 billion by August 2029, which is expected to outperform the overall catering services industry in Hong Kong.
• The overall market size of specialty hotpot restaurant market in Hong Kong is expected to grow at a CAGR of 6.3% from 2024 to 2029, potentially reaching HK$4.0 billion by August 2029, which is expected to outperform the overall hotpot restaurant market and the overall catering services industry in Hong Kong.

Related Party Transactions

• The company has engaged in transactions with related parties, including management fees, office support, manpower support income, and licensing fees.

Stakeholder Impact

• Shareholders will experience immediate and substantial dilution in the net tangible book value of Class A Ordinary Shares purchased.
• Shareholders may face difficulties enforcing their legal rights under United States securities laws against us or our directors and officers.
• Shareholders may face difficulties in protecting their interests, and their ability to protect their rights through U.S. courts may be limited, because we are incorporated in the BVI.

Next Steps

• The company plans to list its Class A Ordinary Shares on the Nasdaq Capital Market under the symbol HCHL.
• The company intends to use the net proceeds of this Offering primarily for business expansion in Hong Kong and Southeast Asia region and working capital and other general corporate purposes.
• The company plans to open 3 more hotpot restaurants in Hong Kong and Singapore by the end of 2029 utilizing the proceeds from this Offering.

Key Dates

Keywords

IPO, Happy City Holdings, Nasdaq, Hong Kong, Hotpot, Restaurant, Class A Ordinary Shares, China, Listing, Securities