F-1/A: DirectBooking Tech Reports Steep Loss, Margin Decline

DirectBooking Technology Co., Ltd. reported a significant net loss and sharp decline in gross profit margins for fiscal year 2025, alongside a large secondary offering by selling shareholders.

Summary

• DirectBooking Technology Co., Ltd. (ZDAI), a Cayman Islands holding company, operates primarily in Hong Kong through its subsidiary, Primega Construction, which provides soil and rock transportation, diesel oil trading, and construction works.
• For the fiscal year ended March 31, 2025, ZDAI reported a net loss of USD6,981,068, a substantial decline from a net income of USD1,091,285 in the prior year.
• Total revenues increased by 43.2% to USD19,275,673, driven by a rise in both soil and rock transportation services (up 26.5% to USD10,668,170) and miscellaneous construction works (up 71.2% to USD8,607,503).
• Despite revenue growth, gross profit decreased by 39.3% to USD1,679,665, with the overall gross profit margin falling sharply from 20.6% in 2024 to 8.7% in 2025.
• The decline in gross profit margin was attributed to cost overruns in construction projects, skilled labor shortages, surging transportation costs, and an inability to pass these increased costs to customers.
• General and administrative expenses surged by 561.9% to USD8,845,949, primarily due to USD6,778,458 in legal and professional fees (including USD6,144,000 in consultancy fees settled by share issuance) and a USD696,639 provision for credit loss.
• Selling shareholders are offering up to 17,840,000 Ordinary Shares for resale, from which the company will not receive any proceeds.
• The company's name was changed from Primega Group Holdings Limited to DirectBooking Technology Co., Ltd. on September 11, 2025.
• The closing price of Ordinary Shares on Nasdaq was $0.73 on September 25, 2025, significantly below the IPO price of $4.00 on July 24, 2024.

Sentiment

Score: 2

Explanation: The company reported a substantial net loss, a sharp decline in gross profit margins, and a significant increase in administrative expenses. The share price has plummeted since its IPO. While revenues increased, profitability suffered severely due to cost pressures and operational challenges. The large secondary offering by selling shareholders, from which the company receives no proceeds, adds further downward pressure and dilution concerns. The extensive list of risks, particularly those related to PRC regulatory uncertainty and the Hong Kong economy, further dampens the outlook.

Positives

• Total revenues increased by 43.2% to USD19,275,673 for the year ended March 31, 2025, indicating strong demand for services.
• Revenue from soil and rock transportation services increased due to undertaking 3 new large-scale transportation projects.
• Revenue from miscellaneous construction works grew by 71.2% year-on-year, reflecting successful expansion in this segment.
• The company believes it has sufficient cash generated from operations and IPO proceeds to meet working capital requirements for the next 12 months.
• New independent directors were appointed, potentially enhancing corporate governance.

Negatives

• Reported a significant net loss of USD6,981,068 for the year ended March 31, 2025, a substantial reversal from a net income of USD1,091,285 in the prior year.
• Gross profit decreased by 39.3% to USD1,679,665, and the gross profit margin sharply declined from 20.6% to 8.7%.
• Significant cost overruns in construction projects and surging transportation costs negatively impacted profitability.
• General and administrative expenses increased by 561.9% to USD8,845,949, largely due to substantial legal and professional fees and a provision for credit loss.
• Net cash used in operating activities was USD2,819,237, a reversal from net cash provided by operating activities in the prior year.
• The company will not receive any proceeds from the sale of 17,840,000 Ordinary Shares by selling shareholders.
• The closing share price of $0.73 on September 25, 2025, is significantly lower than the IPO price of $4.00.
• High customer concentration, with largest customers accounting for 84.57% of total revenue in 2025.

Risks

• Potential for significant oversight and discretion by the PRC government over business activities in Hong Kong, which could materially change operations and/or share value.
• Uncertainties regarding the interpretation and enforcement of PRC and Hong Kong laws, rules, and regulations, which could lead to unpredictable outcomes.
• Increased PRC government control over overseas offerings and foreign investment in Hong Kong-based issuers could limit the ability to offer securities and cause share value to decline.
• Adverse regulatory developments in China may subject the company to additional regulatory review, disclosure requirements, and increased compliance costs.
• Potential subjection to PRC laws and obligations regarding data security, with non-compliance leading to adverse effects on business and share value.
• No guarantee that future audit reports will be issued by PCAOB-inspected auditors, potentially depriving investors of inspection benefits and leading to delisting under the HFCA Act (two consecutive non-inspection years).
• Additional and more stringent criteria applied to emerging market companies by the SEC and Nasdaq could add uncertainties to operations and share price.
• Impact of the Hong Kong National Security Law and the Safeguarding National Security Ordinance (SNSO) on Hong Kong's autonomy and the company's business operations.
• A downturn in the Hong Kong, China, or global economy, or changes in China's economic/political policies, could adversely affect business.
• Changes in HKD/USD currency conversion rates may affect investment value.
• Adverse economic, social, and/or political conditions, social unrest, or natural disasters in Hong Kong could affect business.
• Limitations on legal protections due to uncertainties in the Hong Kong legal system.
• Changes in international trade policies, disputes, or trade wars may dampen growth in Hong Kong.
• Dependence on dividends and other distributions from subsidiaries for cash and financing requirements, with potential limitations on their ability to make payments.
• Internal controls over financial reporting may not be effective, potentially affecting business and reputation.
• Cayman Islands economic substance requirements may have an effect on business and operations.
• High reliance on a small number of customers, making the company vulnerable to project decreases or non-payment.
• Revenue relies on successful tenders for non-recurring projects, with no assurance of future contract awards.
• Operating results are difficult to predict due to various factors.
• Fluctuations in the price or availability of biodiesel oil may adversely affect financial results if costs cannot be passed on.
• Capacity for soil and rock transportation is limited by the availability of machinery and equipment, impacting expansion and contract fulfillment.
• Reliance on third-party suppliers and subcontractors for machinery, equipment, and transportation services, with risks of non-availability, increased costs, or poor performance.
• Damage or loss of machinery and equipment could adversely affect operations and financial performance.
• Potential liability for accidents, pollution, fire, or explosions from oil leakage during the transportation process.
• Failure to meet contractual schedule or completion requirements could result in liquidated damages, reduced profits, and reputational damage.
• Failure to maintain safe work sites could lead to significant losses, investigations, litigation, and reputational harm.
• Risk of non-payment or delayed payment by customers, including related parties, which could adversely affect financial condition and results of operations.
• Revenue may fluctuate due to variation orders (addition, modification, or cancellation of contract work).
• Responsibility for non-performance, delayed performance, sub-standard performance, or non-compliance of subcontractors.
• Increased waste disposal fees (effective April 1, 2025) may lead to changes in the industry and intensified competition, potentially diverting customers.
• Actual project time and costs may deviate from estimates, leading to cost overruns and adversely affecting operations and financial results.
• Cash inflows and outflows in connection with construction projects may be irregular, affecting net cash flow position.
• Claims in connection with employees compensation or personal injuries may arise and affect reputation and operations.
• Any deterioration in the prevailing market conditions in the construction industry may adversely affect performance and financial condition.
• Dependence on key executives, management team, and professional staff, with risks if they leave.
• Inability to obtain sufficient funding on acceptable terms for business expansion.
• Insurance coverage may be inadequate to protect against all potential losses.
• Subject to litigation, arbitration, or other legal proceeding risks.
• Reliance on customers and subcontractors for the provision of machinery and equipment at construction sites.
• Reliance on a stable workforce; labor shortages, industrial actions, strikes, or material increase in labor costs could adversely affect operations and financial results.
• Inability to successfully implement future business plans and objectives.
• A sustained outbreak of the COVID-19 pandemic could have a material adverse impact on business, operating results, and financial condition.
• A severe or prolonged downturn in the global economy, whether caused by economic or political instability, could materially and adversely affect business and results of operations.
• The Russia-Ukraine war's knockdown effects on the global economy could affect business.
• An active trading market for shares may not be sustained, leading to volatility and liquidity issues.
• The trading price of Ordinary Shares could be subject to rapid and substantial volatility, making it difficult for prospective investors to assess value.
• Pre-IPO shareholders will be able to sell their Ordinary Shares subject to restrictions under Rule 144, potentially impacting the trading price.
• Directors, officers, and principal shareholders have significant voting power and may take actions not in the best interests of other shareholders.
• The board of directors may decline to register the transfer of Ordinary Shares in certain circumstances.
• Disclosure controls and procedures may not prevent or detect all errors or acts of fraud.
• No intention to pay dividends for the foreseeable future.
• Securities analysts may not publish favorable research or reports, causing share price or trading volume to decline.
• Certain judgments obtained against the company by shareholders may not be enforceable in the Cayman Islands or Hong Kong.
• Shareholders may have more difficulty protecting their interests than in a U.S. corporation due to Cayman Islands law.
• As a foreign private issuer, the company is exempt from certain U.S. securities rules, affording less protection to shareholders.
• Loss of foreign private issuer status in the future could result in significant additional costs and expenses.
• There can be no assurance that the company will not be a Passive Foreign Investment Company (PFIC) for U.S. federal income tax purposes, which could result in adverse tax consequences.
• As an emerging growth company, the company may take advantage of certain reduced reporting requirements.
• Increased costs as a result of being a public company, particularly after ceasing to qualify as an emerging growth company.
• As a controlled company, the company may choose to exempt itself from certain corporate governance requirements, which could adversely affect public shareholders.
• Selling Shareholders could sell their interests in a private transaction, potentially preventing other shareholders from realizing a change-of-control premium.

Future Outlook

The company intends to pursue strategies to expand its business, including selected strategic acquisition of machinery, enhancing operations as a construction works subcontractor to undertake excavation works, and further enhancing project management capability. It currently intends to retain all available funds and future earnings for business operation and expansion and does not anticipate declaring or paying any dividends in the foreseeable future. Management does not expect the significant consultancy fees incurred in fiscal year 2025 to recur.

Management Comments

• "We believe your background and experience will be a significant asset to the Company and we look forward to your participation on the Board."
• "Our management monitors the cash position of our operating subsidiary regularly and prepares budgets on a monthly basis to ensure it has the necessary funds to fulfill its obligations for the foreseeable future and to ensure adequate liquidity."
• "We currently intend to retain all available funds and future earnings, if any, for the operation and expansion of our business and do not anticipate declaring or paying any dividends in the foreseeable future."
• "The management of the Company does not expect these consultancy services will recur in the future."

Industry Context

The company operates in the Hong Kong construction industry, specifically in soil and rock transportation, diesel oil trading, and construction works. The industry is characterized by competitive tendering processes, reliance on subcontractors, and susceptibility to fluctuations in fuel prices, labor costs, and overall economic conditions. Recent increases in waste disposal fees in Hong Kong (effective April 1, 2025) are expected to intensify competition and may lead customers to seek more cost-effective waste management solutions, potentially diverting business from the company. The global economic slowdown and volatility, exacerbated by factors like the Russia-Ukraine war, also pose risks to the construction industry in Hong Kong.

Comparison to Industry Standards

• The filing does not provide specific comparisons to industry benchmarks or comparable companies/projects.
• The company notes that the construction industry in Hong Kong is highly competitive, leading to scaling down of mark-up margins when competition is intense.

Management Changes

Corporate Governance

Legal Proceedings

• The company, Celestial Power, and Primega Construction are not a party to, and are not aware of any threat of, any legal proceeding that is likely to have a material adverse effect on business, financial condition, or operations as of the date of the prospectus.

Related Party Transactions

• Income from soil and rock transportation services rendered to Chi Yip Eng. & (Trans.) Company Limited (owned by parents of Mr. Man Siu Ming) amounted to approximately US$643,748 for the year ended March 31, 2025 (3.34% of total revenues). No such income was recorded in 2024.
• Site management services provided to Chi Yip contributed approximately US$33,030 for the year ended March 31, 2025.
• Accounts receivable, net, due from Chi Yip amounted to US$445,573 as of March 31, 2025 (increased from US$392,686 in 2024).
• Amount due to Chi Yip (related company) was US$156,248 as of March 31, 2025, related to initial payment of finance lease paid by Chi Yip.
• Amount due to Mr. Man Siu Ming (director) was US$530,078 as of March 31, 2025 (unsecured, interest-free, repayable on demand).

Stakeholder Impact

• Shareholders: Negative impact due to significant net loss, declining gross profit margins, substantial increase in administrative expenses, and a sharp drop in share price since IPO. The large secondary offering by selling shareholders, from which the company receives no proceeds, could further dilute value and create selling pressure.
• Employees: Potential impact from skilled labor shortages and increased labor costs, which the company has been unable to pass on to customers, potentially affecting future compensation or job security if profitability issues persist.
• Customers: Increased demand for transportation and construction services, but also potential for higher waste disposal fees to be passed on, and risks of non-payment or delayed payment to the company.
• Suppliers/Subcontractors: Reliance on subcontractors for labor and machinery, with risks of non-performance or increased costs affecting project delivery and profitability. The company's ability to pay suppliers and subcontractors is dependent on prompt customer payments.
• Creditors: Potential concerns due to the company's net loss and negative cash flow from operations, although management believes it has sufficient liquidity for the next 12 months.

Next Steps

• Re-election of directors at the next annual shareholders meeting.
• Selected strategic acquisition of machinery.
• Enhance operations as a construction works subcontractor to undertake excavation works.
• Further enhance project management capability.
• Monitor the situation regarding COVID-19 throughout 2025 and beyond.
• Continue to monitor developments with U.S. regulatory rules and regulations for public companies.

Key Dates

Recommendation

The company's financial performance for the year ended March 31, 2025, is severely concerning, marked by a substantial net loss of nearly $7 million, a dramatic drop in gross profit margin from 20.6% to 8.7%, and a massive increase in general and administrative expenses. While revenue grew, it was not enough to offset escalating costs and operational inefficiencies, including cost overruns and an inability to pass on rising labor and transportation costs. The stock price has already plummeted from its IPO price of $4.00 to $0.73, indicating significant market dissatisfaction. The large secondary offering by selling shareholders, from which the company receives no proceeds, suggests a lack of confidence from major holders and will likely exert further downward pressure on the stock. Coupled with extensive regulatory and operational risks in Hong Kong and China, and no intention to pay dividends, the investment thesis appears fundamentally broken. Investors should consider exiting their positions to avoid further losses.

Keywords

Construction services, Hong Kong, Transportation services, Soil and rock transportation, C&D materials, Diesel oil trading, ELS works, Bored piling, SEC filing, F-1/A, Nasdaq, ZDAI, Primega Construction, Financial results, Net loss, Gross profit margin, Regulatory risk, China, Cayman Islands, Share resale, Corporate governance, Emerging growth company, Foreign private issuer