F-1: Primega Group Holdings Files F-1 for Major Share Resale Amidst Hong Kong Operations and PRC Regulatory Scrutiny

Primega Group Holdings Limited has filed an F-1 registration statement for the resale of up to 13,464,000 ordinary shares by existing selling shareholders, with the company not receiving any proceeds from these sales, while emphasizing its Hong Kong-based construction and transportation operations and significant regulatory risks tied to PRC oversight.

Summary

• Primega Group Holdings Limited (ZDAI) is a Cayman Islands holding company operating primarily in Hong Kong through its subsidiary, Primega Construction Engineering Co. Limited, focusing on soil and rock transportation, diesel oil trading, and construction works.
• The current F-1 filing is for the resale of up to 13,464,000 ordinary shares by identified Selling Shareholders, from which the company will not receive any proceeds.
• For the fiscal year ended March 31, 2024, total revenue increased by 20.8% to US$13,464,430, up from US$11,143,138 in the prior year.
• Revenue from miscellaneous construction works saw an 806.4% year-on-year growth, becoming a more significant portion of total revenue (37.3% in FY2024 vs. 5.0% in FY2023), while diesel oil trading ceased and soil and rock transportation services revenue decreased.
• Gross profit increased by 27.1% to US$2,768,604 in FY2024, with the gross profit margin slightly improving to 20.6% from 19.5% in FY2023, attributed to the shift towards higher-margin construction works.
• Despite revenue growth, net income decreased by 6.5% to US$1,091,285 in FY2024, compared to US$1,167,260 in FY2023, primarily due to a 12.4% increase in general and administrative expenses, including significant one-off IPO-related legal and professional fees.
• Net cash provided by operating activities significantly increased by 185.0% to US$2,394,212 in FY2024.
• The company highlights substantial risks related to its Hong Kong operations, including potential intervention by the PRC government, regulatory uncertainties, and the implications of the HFCA Act regarding PCAOB inspections.
• As of May 29, 2025, the closing price of ZDAI's Ordinary Shares was $0.8210 per share, a notable decline from its IPO price of US$4.00 per share on July 24, 2024.
• The company has 26,400,000 Ordinary Shares issued and outstanding as of the prospectus date.

Sentiment

Score: 4

Explanation: While the company achieved revenue growth and improved gross margins by shifting to higher-margin construction works, the decline in net income due to increased operating expenses (including significant one-off IPO costs) and the substantial drop in share price since its IPO are concerning. The inherent regulatory and operational risks associated with its Hong Kong/PRC base and concentrated customer base further contribute to a cautious outlook.

Positives

• Total revenue increased by 20.8% to US$13,464,430 for the year ended March 31, 2024, demonstrating business growth.
• Revenue from miscellaneous construction works grew significantly by 806.4% in FY2024, indicating successful expansion into a higher-margin segment.
• Overall gross profit increased by 27.1% to US$2,768,604, and the gross profit margin improved from 19.5% to 20.6% in FY2024, reflecting better profitability from service mix.
• Net cash provided by operating activities increased substantially by 185.0% to US$2,394,212 in FY2024, indicating strong operational cash generation.
• The company possesses a fleet of 42 tipper trucks and machinery, along with a strong network of subcontractors, providing operational capacity.
• Management highlights stable relationships with customers and an experienced and professional management team as competitive strengths.

Negatives

• Net income decreased by 6.5% to US$1,091,285 in FY2024, despite revenue growth, primarily due to increased general and administrative expenses.
• Legal and professional fees increased by 663.6% to US$313,190 in FY2024, largely due to one-off IPO-related costs, impacting profitability.
• Transportation expenses increased by 255.8% to US$237,822 in FY2024, contributing to higher operating costs.
• The company has a concentrated customer base, with its largest customers accounting for approximately 88.88% of total revenue in FY2024 and 79.47% of accounts receivables as of March 31, 2024, posing a significant risk if these relationships deteriorate or payments are delayed.
• Revenue relies on non-recurring projects, with no long-term service agreements, creating uncertainty in future project acquisition.
• The diesel oil trading segment, which contributed 6.6% of revenue in FY2023, generated no revenue in FY2024, indicating a discontinued revenue stream.
• The closing price of Ordinary Shares on May 29, 2025, was $0.8210, a substantial decline from the IPO price of US$4.00 on July 24, 2024.
• A significant amount of US$196,906 was due to a director (Mr. Man Siu Ming) as of March 31, 2024, which is unsecured, interest-free, and repayable on demand.

Risks

• The company's operations in Hong Kong are subject to significant oversight and discretion by the PRC government, which could intervene in or influence business operations and restrict capital movement, potentially causing securities value to decline or become worthless.
• Uncertainties exist regarding the interpretation and enforcement of PRC and Hong Kong laws, rules, and regulations, which could lead to increased compliance costs, negative publicity, and potential liabilities.
• Future actions by the PRC government to exert more control over overseas offerings or foreign investment in China-based issuers could significantly limit the company's ability to offer securities.
• The company may become subject to PRC laws and obligations regarding data security, and non-compliance could materially and adversely affect business and hinder its ability to offer shares.
• There is no guarantee that future audit reports will be issued by auditors fully inspected by the PCAOB, and trading in the company's Ordinary Shares may be prohibited under the HFCA Act if the auditor is not subject to PCAOB inspections for two consecutive years.
• The company may be subject to increased scrutiny, criticism, and negative publicity involving U.S.-listed China-based companies, which could harm business operations, reputation, and share price.
• A downturn in the Hong Kong, China, or global economy, or changes in economic and political policies of China, could materially and adversely affect the company's business and financial condition.
• Changes in currency conversion rates between Hong Kong dollars and U.S. dollars may affect the value of investments, especially if the HKD peg to the USD changes.
• Political risks associated with conducting business in Hong Kong, including the impact of the Hong Kong National Security Law and the Safeguarding National Security Ordinance, could adversely affect the economy and the company's operations.
• The Hong Kong legal system embodies uncertainties that could limit the availability of legal protections, including intellectual property rights enforcement.
• Changes in international trade policies, trade disputes, or the emergence of a trade war may dampen growth in Hong Kong and negatively impact the company's business.
• As a holding company, ZDAI relies on dividends from its subsidiaries, and any limitations on their ability to make payments could materially adversely affect ZDAI's ability to fund its operations and pay dividends.
• The company's internal controls over financial reporting may not be effective, potentially leading to errors or fraud.
• Cayman Islands economic substance requirements may affect the company's business and operations.
• The company's revenue mainly relies on successful tenders or acceptance of quotations for non-recurring soil and rock transportation projects, and failure to secure new projects would affect business operations and financial results.
• Fluctuations in the price or availability of biodiesel oil may adversely affect financial results due to its significant portion of operational costs.
• Primega Construction's capacity is limited by the availability of machinery and equipment, and reliance on third parties for these resources poses risks.
• Any failure, damage, or loss of machinery and equipment may adversely affect operations and financial performance.
• Leakage of biodiesel oil during transportation could lead to liability for accidents, penalties, and reputational damage.
• The construction services industry is highly schedule-driven, and failure to meet schedule requirements could result in financial liability and reputational harm.
• Failure to maintain safe work sites could result in significant losses, investigations, litigation, and damage to business and reputation.
• The company may not receive the full amount due from customers for contract work, and revenue may fluctuate due to variation orders.
• Reliance on subcontractors exposes the company to risks of non-performance, delayed performance, sub-standard performance, or non-compliance by subcontractors.
• Increased waste disposal fees in Hong Kong, effective April 1, 2024, may intensify competition and lead customers to seek alternative waste management solutions, potentially reducing the company's customer base.
• There is no guarantee that safety measures at construction sites will prevent all industrial accidents, which could lead to claims for employee compensation, personal injuries, or property damages.
• Actual time and costs incurred on projects may deviate from initial estimates, leading to cost overruns and adversely affecting operations and financial results, especially with fixed-price contracts.
• Cash inflows and outflows in connection with construction projects may be irregular, potentially affecting net cash flow position.
• Claims related to employee compensation or personal injuries may arise, affecting reputation and operations.
• Any deterioration in the prevailing market conditions in the Hong Kong construction industry may adversely affect performance and financial condition.
• The company is dependent on its key executives, management team, and professional staff, and their loss could adversely impact operations.
• Primega Construction may be unable to obtain sufficient funding on acceptable terms for business expansion.
• The company's insurance coverage may be inadequate to protect it from all potential losses.
• The company may be subject to litigation, arbitration, or other legal proceeding risks.
• Reliance on customers and subcontractors for the provision of machinery and equipment at construction sites poses risks if suitable equipment is not available or functions improperly.
• Reliance on a stable workforce; labor shortages, industrial actions, strikes, or material increases in labor costs could adversely affect operations and financial results.
• The company may be unable to successfully implement its future business plans and objectives, including acquisitions and joint ventures.
• A sustained outbreak of the COVID-19 pandemic or a severe/prolonged downturn in the global economy could materially and adversely affect the business and results of operations.
• The trading price of the company's Ordinary Shares could be subject to rapid and substantial volatility, making it difficult for investors to assess value and potentially resulting in substantial losses.
• Pre-IPO shareholders may sell their shares subject to Rule 144 restrictions, potentially impacting the trading price.
• Directors, officers, and principal shareholders have significant voting power, which may lead to 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.
• The company's disclosure controls and procedures may not prevent or detect all errors or acts of fraud.
• The company does not intend to pay dividends for the foreseeable future, meaning investors may only receive a return through share price appreciation.
• Securities analysts may not publish favorable research or reports, or any information at all, which could cause the share price or trading volume to decline.
• Judgments obtained against the company by U.S. shareholders may not be enforceable in the Cayman Islands or Hong Kong.
• As a foreign private issuer, the company is exempt from certain U.S. securities rules and corporate governance standards, which may afford less protection to shareholders.
• The company may lose its foreign private issuer status in the future, resulting in significant additional costs and expenses.
• There is 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 for U.S. holders.
• As an emerging growth company, the company may take advantage of certain reduced reporting requirements, potentially limiting information available to investors.
• The company will incur increased costs as a public company, particularly after it ceases 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 and subjecting the company to the influence of an unknown third party.

Future Outlook

The company intends to retain all available funds and future earnings for the operation and expansion of its business, with no anticipated dividends in the foreseeable future. Strategic plans include expanding construction projects, strengthening the project management team, and acquiring additional machinery and equipment. The company will continue to closely monitor the COVID-19 situation throughout 2025 and beyond, and may consider raising additional capital through share offerings or capital markets if liquidity issues arise.

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."
• "In the event that there is a need for cash or a potential liquidity issue, it will be reported to our chief financial officer and subject to approval by our board of directors."
• "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."
• "Our management considered that this segment [miscellaneous construction works] had a better growth potential in Hong Kong and by undertaking construction works of higher complexity, we could have a chance to increase profitability."
• "We believe we have sufficient cash generated from operations to meet our regular working capital requirements based on the contracts on hand and cashflow projection for the next 12 months from the end of fiscal year 2024, which is also based on our managements experience and the financial data available."

Industry Context

Primega Group Holdings operates in the Hong Kong construction industry, specializing in soil and rock transportation, diesel oil trading, and construction works like ELS and bored piling, primarily as a subcontractor. The industry is characterized by its schedule-driven nature and high competition, with projects often secured through competitive tenders. The company's focus on environmentally friendly practices, such as repurposing excavated materials, aligns with broader sustainability trends. However, the industry is sensitive to external factors like fuel price fluctuations, machinery availability, labor costs, and the overall economic and political conditions in Hong Kong and China. Recent increases in waste disposal fees in Hong Kong are expected to intensify competition and may prompt customers to seek more cost-effective waste management solutions.

Comparison to Industry Standards

• The document does not provide specific industry benchmarks, comparable companies, or project results to assess the company's performance against global or regional standards.

Management Changes

Corporate Governance

Legal Proceedings

• As of the date of this prospectus, the Company, Celestial Power, and Primega Construction are not a party to, and are not aware of any threat of, any legal proceeding that, in the opinion of management, is likely to have a material adverse effect on the business, financial condition, or operations.

Related Party Transactions

• Chi Yip Eng. & (Trans.) Company Limited (Chi Yip), a company owned by the parents of Mr. Man Siu Ming (CEO and Director), was a major customer in FY2023, contributing approximately US$2,830,435 (25.40%) of total revenue.
• Accounts receivable due from Chi Yip amounted to US$1,903,672 as of March 31, 2023, decreasing to US$392,686 as of March 31, 2024, representing 32.82% and 7.4% of consolidated accounts receivables, respectively.
• Primega Construction ceased providing soil and rock transportation and site management services to Chi Yip during FY2024, resulting in no revenue from Chi Yip for that year.
• An amount of US$196,906 was due to Mr. Man Siu Ming (a director) as of March 31, 2024 (down from US$545,063 as of March 31, 2023); this balance is unsecured, interest-free, and repayable on demand.
• An amount of US$156,248 was due to Chi Yip (a related company) as of March 31, 2024, related to an initial payment of finance lease paid by Chi Yip.
• Mr. Man Siu Ming sold an aggregate of 13,464,000 shares to the Selling Shareholders on April 7, 2025, as detailed in the Share Purchase Agreements.

Stakeholder Impact

• Shareholders face potential for significant share price volatility, substantial losses (given the stock's decline since IPO), and less protection due to the company's foreign private issuer and controlled company status. The resale of shares by selling shareholders, from which the company receives no proceeds, could exert downward pressure on the stock price. No dividends are expected in the foreseeable future.
• Employees are exposed to risks related to work site safety, which could lead to injuries and increased turnover. The company's reliance on a stable workforce means labor shortages or increased labor costs could adversely affect operations.
• Customers face potential project delays or quality issues if subcontractors underperform, and may seek more cost-effective options due to increased waste disposal fees, potentially impacting the company's customer base.
• Suppliers and subcontractors are critical to the company's operations, and the company's dependence on them without long-term contracts poses risks if they cannot provide services at acceptable prices or if costs increase. The company may also bear responsibility for subcontractor non-performance.
• Creditors may be impacted by irregular cash flows from construction projects, as the company relies on prompt customer payments to meet its obligations to suppliers and subcontractors.

Next Steps

• Selling Shareholders may offer and sell the registered Ordinary Shares publicly or through private transactions.
• The company plans to expand its business by undertaking more construction projects.
• The company intends to strengthen its project management team.
• The company plans to acquire additional machinery and equipment, including tipper trucks and excavation machines.
• The company will continue to closely monitor the COVID-19 situation throughout 2025 and beyond.
• In the event of insufficient liquidity, the company may consider raising capital through offering additional shares or tapping into an appropriate capital market.

Key Dates

Recommendation

Keywords

Primega Group Holdings, ZDAI, Hong Kong, Construction, Transportation, Soil and Rock Transportation, ELS Works, Bored Piling, SEC F-1, Share Resale, Cayman Islands, PRC Regulatory Risk, Nasdaq, Emerging Growth Company, Foreign Private Issuer, HFCA Act, PCAOB, Corporate Governance, Financial Results, Construction Waste, Biodiesel Oil Trading