F-1/A: New Century Logistics (BVI) Limited Files for IPO on Nasdaq Capital Market

New Century Logistics (BVI) Limited, a Hong Kong-based freight forwarding service provider, is seeking to raise capital through an initial public offering of 1,250,000 ordinary shares on the Nasdaq Capital Market.

Summary

• New Century Logistics (BVI) Limited, a freight forwarding service provider based in Hong Kong, has filed for an IPO to list its ordinary shares on the Nasdaq Capital Market under the ticker symbol NCEW.
• The company is offering 1,250,000 ordinary shares with an expected price range of $4.00 to $5.00 per share.
• The IPO is contingent upon final approval from Nasdaq, and there is no guarantee that the listing will be approved or that the offering will close.
• New Century Logistics (BVI) Limited operates through its subsidiaries in Hong Kong, providing air and ocean freight forwarding services to over 140 countries.
• For the six months ended March 31, 2024, the company's total revenue was approximately U.S. $25.3 million.
• For the years ended September 30, 2023 and 2022, the company's total revenue amounted to approximately U.S.$36.1 million and U.S.$75.2 million, respectively.
• The company intends to use the net proceeds from the offering for business expansion, technology innovation, enhancing warehousing and distribution capabilities, recruitment of talented personnel, and general working capital.
• Craft Capital Management LLC is acting as the underwriter for the offering and has been granted a 45-day option to purchase up to an additional 15% of the ordinary shares.
• The company is an emerging growth company and a foreign private issuer, which allows it to take advantage of certain reduced reporting requirements.

Sentiment

Score: 5

Explanation: The document presents a mixed sentiment. While the company is pursuing growth through an IPO and has a long-standing history, there are significant risks and a recent decline in revenue. The dependence on regulatory approvals and potential political instability in Hong Kong also contribute to a neutral sentiment.

Positives

• The company has a long-standing history in the freight forwarding industry, dating back to 2002.
• The company offers routes to over 140 countries, demonstrating a broad service network.
• The company has an experienced management team with over 20 years of combined expertise.
• The company intends to use the IPO proceeds for growth initiatives, including business expansion and technology innovation.

Negatives

• The IPO is contingent upon final approval from Nasdaq, and there is no guarantee of listing approval.
• The company's revenue decreased significantly from U.S.$75.2 million in 2022 to U.S.$36.1 million in 2023.
• The company is subject to uncertainty about any future actions of the PRC government or authorities in Hong Kong.
• The company is an emerging growth company and a foreign private issuer, which could make it more difficult to compare its performance with other public companies.

Risks

• The company's revenues, operating income, and cash flows are likely to fluctuate.
• The company relies on a limited number of vendors.
• The company may be subject to cyber-attacks and data breaches.
• The company operates in a highly competitive industry.
• The company's results of operations are affected by international trading volumes and global and regional economic conditions.
• There is no assurance that Hong Kong will continue to maintain its position as a logistics hub in Asia.
• As a holding company, the company relies on dividends from its subsidiaries.
• The PRC government may intervene or influence the company's current and future operations in Hong Kong.
• The company's ordinary shares may be prohibited from trading on a national exchange or over-the-counter market under the Holding Foreign Companies Accountable Act.
• Investors purchasing the company's securities in this offering will experience immediate dilution.
• There has been no public market for the company's ordinary shares prior to this offering, and investors may not be able to resell the shares at or above the price they pay for them.
• The market price for the company's ordinary shares may be volatile.

Future Outlook

The company expects that it will take time for customers to return to the previous mode of logistics services. Some of the customers may permanently switch to using sea transportation. The company expects that its overall general and administrative expense, including salaries and professional and business consulting expenses, will increase in the foreseeable future, as it plans to hire additional personnel and incur additional expenses in connection with the expansion of its business operations. The company expects its professional fees for legal, audit, and advisory services to increase when it becomes a public company upon the completion of this offering.

Industry Context

The freight forwarding market in Hong Kong is highly fragmented with a large number of small and medium-sized players. The PRC government has reduced tax on logistics enterprises and promoted advanced logistics management system to accelerate industry reform. Airports in Shenzhen, Guangzhou and Shanghai have expanded, which would result in intensifying competition. The development of logistics industry in the PRC would directly enhance their competitiveness and performance, and hence imposing potential impact on the Hong Kong freight forwarding industry.

Comparison to Industry Standards

• The freight forwarding market in Hong Kong is highly fragmented with a large number of small and medium-sized players.
• Tier-one freight forwarders are generally the global leading mega logistics groups with worldwide logistics network and business coverage, while tier-two freight forwarders are generally local and regional players with networks covering certain focused logistic locations and categories of goods.
• The leading market players are usually the tier-one freight forwarders and the aggregate market share of top five players of air and ocean freight forwarding market in 2022 was 15.9%.
• The Group recorded the revenue of approximately HK$0.6 billion and had a market share of 0.3% in the provision of air and ocean freight forwarding service in Hong Kong.
• The Group was the fifth largest tier-two freight forwarding services providers in Hong Kong.
• Competitors include global logistics companies such as Company A (Kuehne + Nagel), Company B (DSV), Company C (DB Schenker), Company D (DHL), and Company E (Expeditors).

Legal Proceedings

• The company filed a lawsuit against a PRC customer who defaulted in its payments owing to the Company of approximately U.S. $345,680 (HK$2.7 million).
• The PRC customer since then has declared bankruptcy and the Company has decided to not pursue the enforcement against the PRC customer.

Related Party Transactions

• On December 1, 2022, the Company entered into facility letter with a shareholder, Sin Yuk Hung to offer facility of up to HK$2 million ($256,410) being made available to the shareholder for overdraft.
• On December 22, 2022, the Company entered into a loan and sale and purchase agreement (the Agreement) with Ngan Ching Shun and Asia International Securities Exchange Co., Ltd (AISE), pursuant to which AISE acquired 21% shareholding in the Company from Mr. Ngan and as part of the Agreement, AISE agreed to lend the Company up to the amount of $2 million in order to finance for payment of the expenses of the offering.

Stakeholder Impact

• Shareholders will experience immediate dilution in the net tangible book value of ordinary shares purchased.
• The company's ordinary shares may be prohibited from trading on a national exchange or over-the-counter market under the Holding Foreign Companies Accountable Act, which could materially and adversely affect the value of your investment.

Next Steps

• Obtain final approval from Nasdaq for listing on the Nasdaq Capital Market.
• Close the offering and begin trading on the Nasdaq Capital Market.
• Implement the use of proceeds for business expansion, technology innovation, enhancing warehousing and distribution capabilities, recruitment of talented personnel, and general working capital.

Key Dates

Keywords

freight forwarding, logistics, IPO, Nasdaq, Hong Kong, air freight, ocean freight, warehousing, Craft Capital Management, NCEW