F-1/A: TechCreate Group Files IPO Amidst Rising Losses

Singapore-based TechCreate Group, a technology consultancy and software solutions provider, is seeking to raise up to US$13.2 million in its initial public offering on the NYSE American, despite reporting a significant increase in net loss for 2024.

Summary

• The company is offering 2,550,000 Class A Ordinary Shares in its initial public offering, with an anticipated price range of US$4.00 to US$5.00 per share.
• The offering includes an over-allotment option for underwriters to purchase up to an additional 382,500 Class A Ordinary Shares, potentially increasing total proceeds to US$13.2 million.
• Net proceeds from the offering are planned for sales and marketing (25%), research and development (35%), and potential mergers and acquisitions (30%), with the remainder for working capital.
• The company reported a net loss of S$1,012,826 (US$750,019) for the year ended December 31, 2024, a 420% increase from S$194,795 in 2023.
• Gross profit decreased by 37% to S$893,816 (US$661,890) in 2024 from S$1,418,867 in 2023, with the gross profit margin declining from 49% to 29%.
• Revenue increased by 8% to S$3,104,324 (US$2,298,818) in 2024, primarily driven by a 101% increase in professional services revenue.
• Cash used in operating activities was S$1,286,364 (US$952,580) in 2024, a significant shift from S$141,242 generated in 2023.
• Mr. Lim Heng Hai, the Chairman and CEO, will beneficially own all Class B Ordinary Shares, constituting approximately 86.1% of the total voting power immediately after the offering.
• The company is an emerging growth company and a foreign private issuer, which allows for certain reduced public company reporting requirements.

Sentiment

Score: 3

Explanation: The company is pursuing an IPO in a high-growth sector with innovative technology and strategic expansion plans. However, the significant increase in net loss and decrease in gross profit margin in the most recent fiscal year, coupled with negative cash flow from operations, raises substantial financial concerns. The high dilution for new investors and the inherent risks of being an emerging, foreign private, and controlled company further temper positive sentiment, indicating a challenging financial position despite strategic ambitions.

Positives

• Revenue increased by 8% to S$3,104,324 (US$2,298,818) in 2024, primarily driven by a 101% increase in professional services revenue.
• The company's strategic acquisition of Diginius Private Limited strengthened its cybersecurity capabilities and expertise.
• The proprietary Artificial Intelligence Real-Time Engine (AI-RTE) is highlighted as a flagship product enabling faster, more secure, and efficient real-time payments.
• The company possesses strong expertise in ISO 20022 implementation, evidenced by its representation in Singapore's Registration Management and Payment Standard Evaluation Groups and drafting critical components of Singapore's ISO 20022 interbank clearing and settlement message definition.
• Identified significant market opportunities in Southeast Asia's transaction banking payment middleware market, projected to grow at a 22.3% CAGR to USD 9.4 billion by 2028.
• Digital payment transactions via POS QR Code payment terminals in Southeast Asia are expected to grow to USD 13.3 trillion by 2028 at a 23.7% CAGR, indicating strong market tailwinds.
• Plans for geographic expansion into the United States (leveraging ISO 20022 transition) and South Korea (addressing heightened cybersecurity needs) present new growth avenues.
• The company was granted a 60-day extension for its Annual General Meeting by the Registrar of Companies in Singapore, ensuring compliance despite a delay.
• Maintains professional indemnity insurance coverage, which is reviewed annually to ensure sufficiency.
• No material employment disputes or work stoppages have been experienced, indicating good working relationships with employees.
• Committed to environmental responsibility by leveraging cloud-based infrastructure to reduce its environmental impact.

Negatives

• Net loss increased significantly by 420% to S$1,012,826 (US$750,019) in 2024 from S$194,795 in 2023.
• Gross profit decreased by 37% to S$893,816 (US$661,890) in 2024, with the gross profit margin declining from 49% in 2023 to 29% in 2024.
• Cost of revenue increased by 51% to S$2,210,508 (US$1,636,928) in 2024, primarily due to higher contractor service engagements and third-party software license costs.
• Cash flow from operating activities shifted from a positive S$141,242 (US$104,500) in 2023 to a negative S$1,286,364 (US$952,580) in 2024.
• The company is highly dependent on a few major customers; in 2024, four customers accounted for 87% of total revenue, posing a risk if relationships deteriorate or contracts are terminated.
• Dependence on major suppliers is also a risk, with two suppliers accounting for 25% of total cost of revenue in 2024, and no long-term agreements in place with major suppliers for 2024.
• Overdue trade receivables amounted to approximately S$191,766 (US$142,007), representing 7% of current assets as of December 31, 2024.
• New investors in the offering will experience significant dilution, with an immediate dilution in net tangible book value of US$4.03 per Class A Ordinary Share.
• The management team has limited experience managing a public company, which could strain resources and divert attention from day-to-day business operations.
• A material weakness in internal control over financial reporting was identified due to a lack of sufficient financial reporting and accounting personnel with U.S. GAAP and SEC reporting knowledge.
• The dual-class voting structure concentrates approximately 86.1% of voting control with Mr. Lim Heng Hai, potentially limiting the influence of Class A shareholders.
• As an emerging growth company and foreign private issuer, the company is exempt from certain U.S. public company reporting requirements, which may result in less information for investors.
• The company has not declared or paid any cash dividends and does not have present plans to do so in the foreseeable future, intending to retain earnings for business expansion.

Risks

• Economic conditions and ongoing geopolitical uncertainties and conflicts could materially and adversely affect business, financial condition, and results of operations.
• Dependence on major customers for a substantial portion of revenue; loss or significant reduction in services to one or more major customers could negatively impact revenue and operating results.
• Dependence on major suppliers to support the provision of services and products; inability to establish and maintain an uninterrupted supply chain could negatively impact revenue and operating results.
• Failures, defects, errors, or vulnerabilities in systems could adversely affect business, financial condition, and results of operations.
• Reliance on artificial intelligence (AI) in products and services may result in operational challenges, legal liability, reputational concerns, and competitive risks.
• Actual or perceived failure to protect information provided by users and commercial partners, or other confidential information, and to comply with relevant laws and regulations could adversely affect business.
• Reliance on third parties (e.g., Amazon Web Services) to deliver services; any disruption or interference could adversely affect business.
• Failure to accurately predict, prepare for, and respond promptly to rapidly evolving technological and market developments in the security market could harm competitive position and prospects.
• Business is dependent on the level of awareness of cybersecurity threats; a perceived decline in threats could adversely affect customer acquisition.
• Increasing focus on cloud-based services presents execution, competitive, and compliance risks; revenue growth may be materially adversely affected by the ability to develop and generate sufficient usage of such services.
• Competition in a highly competitive and rapidly evolving market with established players and the possibility of new entrants disrupting the market over time.
• Business is dependent on project-based contracts, and the company may be unable to secure new contracts of similar value or profit margins.
• Clients may delay in settlement of bills, which may result in a material adverse impact on business, financial conditions, and results of operations.
• Company may encounter cost overruns or delays in its projects, which may materially and adversely affect its business, financial position, and results of operation.
• Ability to sell solutions is dependent on the quality of technical support services; failure to offer high-quality support could have a material adverse effect on customer satisfaction, sales, and operating results.
• Current research and development efforts may not produce successful solutions that result in significant revenue, cost savings, or other benefits in the near future, if at all.
• Failure to manage growth effectively could adversely affect brand, business, financial condition, and results of operations.
• May need to raise additional capital to grow business or satisfy liquidity requirements and may not be able to raise additional capital on terms acceptable or at all.
• May be subject to complaints, litigation, arbitration proceedings, and regulatory investigations and inquiries from time to time.
• Claims by others that the company infringes their proprietary technology or other rights could harm business.
• Proprietary rights (e.g., know-how, source code) may be difficult to enforce or protect, which could enable others to copy or use aspects of products without compensating the company.
• Ability to attract, train, and retain executives and other qualified employees is critical to business, results of operations, and future growth.
• Future international expansion could subject the company to additional costs and risks, and such plans may not be successful.
• Acquisitions or strategic investments that may be pursued may not be successful or yield the intended benefits and could disrupt business and harm financial condition.
• Business could be adversely affected by natural disasters, political conflicts, or other unexpected events.
• May not be able to obtain or maintain adequate insurance coverage.
• Business is subject to legal and regulatory risks that could have a material and adverse impact on business, financial condition, and results of operations.
• COVID-19 and other pandemics, epidemics, or public health threats may adversely affect business, financial condition, and results of operations.
• Business depends on a strong reputation and brand; any failure to maintain, protect, and enhance the brand could have a material adverse effect.
• May fail to obtain, maintain, or renew the requisite licenses and approvals for business operations.
• Changes in, or failure to comply with, competition laws or regulations could adversely affect the company.
• Subject to various laws regarding anti-corruption, anti-bribery, anti-money laundering, and countering the financing of terrorism, with operations in certain countries known to experience high levels of corruption.
• Could face uncertain tax liabilities in various jurisdictions in which it operates, which could adversely impact operating results.
• Management team has limited skills and experience related to managing a public company, potentially straining resources and diverting attention.
• The obligation to disclose information publicly may put the company at a disadvantage to competitors that are private companies.
• Dual-class voting structure concentrates voting control to holders of Class B Ordinary Shares, limiting or precluding the ability of Class A shareholders to influence corporate matters.
• As a foreign private issuer, the company is exempt from certain provisions applicable to U.S. domestic public companies, potentially making it more difficult for investors to evaluate performance and prospects.
• As a controlled company, the company will be eligible to rely on exemptions from certain corporate governance requirements, which could change and afford less protection to shareholders.
• As an emerging growth company, reduced reporting requirements may make Class A Ordinary Shares less attractive to investors.
• May be deemed a passive foreign investment company (PFIC) for U.S. federal income tax purposes for any taxable year, which could result in adverse U.S. federal income tax consequences to U.S. holders.
• The market price and trading volume of Class A Ordinary Shares may be volatile and could decline significantly following this offering.
• If securities or industry analysts do not publish research, publish inaccurate or unfavorable research, or cease publishing research about the company, share price and trading volume could decline significantly.
• Operating results may vary significantly from period to period and be unpredictable, which could cause the market price of Class A Ordinary Shares to decline.
• Actual operating results may differ significantly from guidance provided.
• Sales of substantial amounts of Class A Ordinary Shares in the public markets, or the perception that they might occur, could reduce the price and dilute voting power and ownership interest.
• Failure to meet the continued listing requirements of the NYSE American could result in a delisting of Class A Ordinary Shares.
• Management may allocate the net proceeds from this offering in ways that investors may not approve.
• Techniques employed by short sellers may drive down the market price of listed securities.
• Failure to maintain proper and effective internal controls over financial reporting may adversely affect investor confidence and the value of securities.
• Reporting obligations as a public company may place a significant strain on management, resources, and systems.
• Difficulties in protecting shareholder interests, as Cayman Islands law provides substantially less protection compared to U.S. law, and enforcement of U.S. judgments may be difficult.
• The Board may decline to register transfers of Class A Ordinary Shares in certain circumstances.
• Shareholders may be unable to present proposals before annual general meetings or extraordinary general meetings not called by shareholders.
• The company may not be able to, or may decide not to, pay dividends or repurchase shares at a level anticipated by shareholders, which could reduce shareholder returns.
• Prospective investors should not place any reliance on information contained in press articles or the media regarding the company that is not in the prospectus.
• Forward-looking statements contained in the document are subject to risks and uncertainties.

Future Outlook

TechCreate Group aims to be the preeminent Real-Time Payment (RTP) solutions provider in Southeast Asia, leveraging its AI-RTE and strategic partnerships. The company plans significant geographic expansion into the United States and South Korea, driven by upcoming ISO 20022 messaging format transitions and heightened cybersecurity needs. Future plans include continuous investment in research and development to enhance AI-RTE capabilities (e.g., real-time fraud detection, predictive analytics) and expand digital solutions (e.g., regulatory compliance support, data analytics). The company also intends to pursue organic growth by increasing financial institution clientele and strategic acquisitions to expand its solution suite, while focusing on building recurring revenue streams through value-added services and ongoing support.

Management Comments

• "Our mission is to redefine the digital payments landscape by establishing TechCreate as the unparalleled leader in RTP solutions across ASEAN."
• "As a trusted partner in innovation, we empower businesses with transformative payment technologies, robust cybersecurity, and cutting-edge digital solutions."
• "Our flagship product is the Artificial Intelligence Real-Time Engine (AI-RTE), which we believe enables financial institutions to process payments with greater speed, security, and efficiency."
• "We believe our growth is built on disciplined expansion and reinvestment into innovation, sustained by our profitability and commitment to excellence."
• "We believe TechCreate is more than a technology company, rather it represents a vision for a better-connected, more secure, and innovative future."
• "We believe TechCreate is uniquely positioned to capitalize on the extraordinary opportunities presented by the rapidly evolving global and regional landscapes of RTP, cybersecurity, and digital transformation."
• "Our leadership in ISO 20022 implementation is evidenced by our representation of Singapore in the Registration Management and Payment Standard Evaluation Groups, as well as drafting critical components of the Singapore ISO 20022 interbank clearing and settlement message definition."
• "We believe our Groups smaller size and focused specialization, relative to established industry players such as Fidelity National Information Services, Inc. (FIS), Finastra Group Holdings Limited, Vocalink Holdings Limited, and ACI Worldwide Inc. give us the ability to quickly adapt to change in the industry space and make and implement important decisions at a faster pace."
• "We believe that our low operating costs and specialization allow us to maintain competitive pricing as savings are passed on to clients through competitive pricing."
• "We expect the RTP business expansion will contribute significantly to our overall revenue and profitability due to growth anticipated in Southeast Asia's RTP market, the creation of recurring revenue streams through our value-added services and ongoing support services, and the scalability of our RTP solution."
• "We believe our strong understanding of ISO 20022 implementation is crucial to our success as ISO 20022 is an international standard for electronic data exchange between financial institutions."
• "We believe our extensive experience and expertise in ISO 20022 implementation provides a significant advantage to us when marketing ourselves, particularly with smaller FIs that may face challenges navigating these new requirements."
• "We believe our RTE is poised to redefine how financial institutions and businesses operate in the digital economy."
• "We believe our commitment to excellence and our ability to provide solutions that align with industry regulations and client expectations make us a preferred choice in a competitive market."
• "We believe that our Group has sufficient working capital for our requirements for at least the next 12 months from December 31, 2024, in absence of unforeseen circumstances."

Industry Context

TechCreate Group operates in the rapidly evolving FinTech sector, specifically targeting the transaction banking payment middleware, POS QR Code payment terminal, and broader digital solutions markets in Southeast Asia. The company aims to capitalize on the accelerating demand for Real-Time Payment (RTP) systems, driven by government initiatives for cashless economies, surging e-commerce, and smartphone adoption. The global adoption of ISO 20022 is a key market driver, positioning TechCreate's expertise as crucial for financial institutions. The increasing complexity of financial systems also fuels demand for robust cybersecurity, an area where TechCreate has expanded through acquisition. While competing with established global players like Fidelity National Information Services, Inc. (FIS), Finastra Group Holdings Limited, and ACI Worldwide Inc., TechCreate emphasizes its agility, regional expertise in RTP systems (FAST, PayNow, DuitNow), and proprietary AI-RTE to offer faster, more secure, and cost-effective integrations. The company seeks to differentiate itself by providing holistic solutions and leveraging strategic partnerships to offer a 'one-stop-shop' for digital and payment needs.

Comparison to Industry Standards

• The transaction banking payment middleware market in Southeast Asia is projected to grow at a CAGR of 22.3% to USD 9.4 billion by 2028, significantly faster than the U.S. market's projected 6.4% CAGR to USD 14.5 billion by 2028. TechCreate's focus on this high-growth region aligns with industry trends.
• Digital payment transactions via POS QR Code payment terminals in Southeast Asia are expected to grow to USD 13.3 trillion by 2028 at a CAGR of 23.7%, indicating a strong market tailwind for TechCreate's integrated solutions.
• TechCreate's proprietary AI-RTE is positioned against modular solutions offered by major competitors like Fidelity National Information Services, Inc. (FIS), Finastra Group Holdings Limited, and ACI Worldwide Inc., aiming to consolidate speed, scalability, and security into a unified, AI-driven framework.
• The company's involvement in drafting Singapore's ISO 20022 interbank clearing and settlement message definition and its representation in global ISO 20022 groups demonstrate a level of industry leadership and expertise comparable to or exceeding some established players in this specific standard.
• Compared to larger, established industry players, TechCreate highlights its 'smaller size and focused specialization' as a competitive strength, allowing for quicker adaptation to industry changes and faster decision-making.
• The company claims 'competitively priced solutions' due to low operating costs and specialization, which may offer a cost advantage over larger, more diversified competitors.

Management Changes

Corporate Governance

Legal Proceedings

• No pending or threatened claims and litigation as of December 31, 2024, and through the date the consolidated financial statements were available to be issued.
• Not a party to any legal or governmental proceedings (including any pending or known to be contemplated) which may have a material adverse effect on business, financial condition, or results of operations in Singapore.
• Not aware of any legal proceedings outside of Singapore.

Related Party Transactions

• Rental income from Orange Pay Pte. Ltd. (company wholly owned by Mr. Lim Heng Hai): S$14,400 in 2023, S$14,440 in 2024.
• Sale of products to Gridhut Automation Pte Ltd (65% owned by Mr. Lim Heng Hai, 7.5% by Mr. Ronald Vong Chin Hua): S$11,031 in 2023, S$0 in 2024.
• Sub-contractor charges from TechCreate Solutions Sdn Bhd (Mr. Ronald Vong Chin Hua is shareholder/director, Mr. Lim Heng Hai is director): S$223,755 in 2023, S$515,007 in 2024.
• Sub-contractor charges from Orange Pay Pte. Ltd.: S$0 in 2023, S$154,000 in 2024.
• Payments on behalf by Mr. Lim Heng Hai and Mr. Ronald Vong Chin Hua (directors/shareholders): S$36,770 in 2023, S$21,285 in 2024.
• Payments on behalf of Orange Pay Pte. Ltd. (company owned by Mr. Lim Heng Hai) for AWS service charges: S$48,579 in 2023, S$45,718 in 2024.
• Working capital loans jointly secured by Mr. Lim Heng Hai and Mr. Ronald Vong Chin Hua (directors and shareholders) for DPL (S$500,000) and TSPL (S$350,000) in 2024.
• Amount due from related party (Orange Pay Pte. Ltd.): S$56,887 in 2023, S$11,772 in 2024.
• Amount due to directors (Mr. Lim Heng Hai and Mr. Ronald Vong Chin Hua): S$6,943 in 2023, S$14,907 in 2024.

Stakeholder Impact

• Shareholders (Existing): Experience significant dilution (US$4.03 per Class A Ordinary Share) from the IPO. Voting power is highly concentrated with Mr. Lim Heng Hai (86.1%), limiting influence for other shareholders. No dividends are planned in the foreseeable future.
• Shareholders (New IPO Investors): Face substantial dilution upon investment. Will have limited voting influence due to the dual-class share structure. Investment carries high risk due to the company's financial performance (increased losses, negative operating cash flow) and inherent risks of an emerging, foreign private, controlled company.
• Employees: Benefit from the 2025 Share Incentive Plan, linking their interests to company performance. The company is investing in recruitment and training to support growth.
• Customers: The company aims to enhance customer satisfaction through high-quality solutions, ongoing support, and future-proof systems. However, dependence on a few major customers poses a risk if relationships deteriorate or contracts are terminated.
• Suppliers: The company depends on major suppliers for critical services and products, and any disruption in the supply chain could negatively impact operations.
• Creditors: The company has taken on working capital loans in 2024, increasing interest expense and liabilities. The ability to pay debts as they mature is stated to be sufficient for the next 12 months, but this is based on estimated IPO proceeds.

Next Steps

• Apply to list Class A Ordinary Shares on the NYSE American under the symbol TCGL.
• Complete the initial public offering after the registration statement becomes effective.
• Allocate net proceeds: 25% for sales and marketing, 35% for research and development, 30% for potential mergers and acquisitions, and the remainder for working capital and general corporate purposes.
• Expand business focus in Real-Time Payments (RTP) to become a preeminent provider in Southeast Asia.
• Geographic expansion into the United States and Republic of Korea.
• Invest in research and development to enhance proprietary AI-RTE and develop a comprehensive suite of RTP solutions.
• Pursue organic growth by increasing financial institution clientele and strategic alliances with FinTech players.
• Seek inorganic growth opportunities through acquisitions and joint ventures.
• Cultivate strong client relationships to build recurring revenue streams through value-added services and ongoing support.
• Maintain an effective registration statement on Form F-1 (or F-3) covering the resale of shares issuable upon exercise of Representatives Warrants.
• Maintain listing of Class A Ordinary Shares on the NYSE American for a period of at least five years after the effective date.
• Remediate identified material weakness in internal control over financial reporting by hiring qualified personnel, implementing training, and establishing effective oversight.

Key Dates

Recommendation

While TechCreate Group operates in a high-growth industry with innovative technology (AI-RTE) and clear strategic expansion plans, the recent financial performance shows significant deterioration. The substantial increase in net loss (420% in 2024) and sharp decline in gross profit margin (from 49% to 29%) are major concerns. The shift to negative cash flow from operations in 2024 indicates a reliance on financing activities. For new investors, the immediate dilution is substantial. Given these financial headwinds and the inherent risks associated with an emerging, foreign private, and controlled company, a 'hold' recommendation is appropriate for potential investors. It suggests caution due to the current financial performance and high-risk profile, despite the promising industry and strategic vision. Existing shareholders should monitor the company's ability to execute its growth strategies and improve profitability post-IPO.

Keywords

FinTech, Real-Time Payments, RTP, Cybersecurity, Digital Solutions, Technology Consultancy, AI-RTE, IPO, NYSE American, Singapore, Cayman Islands, Dual-Class Shares, Controlled Company, Emerging Growth Company, ISO 20022, Financial Technology, Payment Systems, IT Infrastructure, Cloud Services