Tu Yi Holding Company Limited Announces Details of Proposed Listing on Main Board of The Stock Exchange of Hong Kong Limited

Mr Yu Dingxin, Chairman and Executive Director
  • Global Offering of 250,000,000 Shares
  • At Offer Price Between HK$0.52 and HK$0.68 per Share

Tu Yi Holding Company Limited (the “Company”, together with its subsidiaries collectively, the “Group”), a well-established and active outbound travel products and service provider in the PRC, has today announced the details of its listing on the Main Board of The Stock Exchange of Hong Kong Limited (“SEHK”).

– The Group is a well-established and active outbound travel products and service provider in the PRC, with a particular focus in Japan bound package tours and related FIT Products to customers in Eastern China. For FY2018, Tu Yi ranked fifth in Eastern China in terms of revenue of outbound tourism to Japan
– The Group is dedicated to establishing market presence in Japan, by establishing subsidiaries in Japan, one of which is wholly-owned by the Group and currently owns two hotels located in Tokyo and Izu, respectively
– The Group believes that developing new products which suit the latest market needs is the key to its long term success and is dedicated to developing competitive package tours and FIT products. It has also maintained good business relationships with airlines and other suppliers
– For the three months ended 31 March 2019, the Group’s unaudited revenue amounted to approximately RMB64.1 million, representing an approximately 40.6% increase from RMB45.6 million for the same period in 2018. Such increase in revenue was mainly resulted from the significant increase in the number of travellers for the Group’s package tours and day tours from a total of approximately 7,920 to approximately 33,368 travellers. As a result of its business growth, the Group’s unaudited adjusted net profits after excluding listing expenses increased significantly from approximately RMB4.2 million for the three months ended 31 March 2018 to approximately RMB11.3 million for the same period in 2019

Offering Details
The Group plans to offer an aggregate of 250,000,000 shares publicly in Hong Kong, including 225,000,000 shares for the International Placement (subject to reallocation and Over-allotment Option) and 25,000,000 shares for the Hong Kong Public Offer (subject to reallocation). The indicative Offer Price range is set between HK$0.52 and HK$0.68 per Share. Assuming an Offer Price of HK$0.60 per Share (being the mid-point of the Offer Price range) and after deducting underwriting commission and other related expenses, net proceeds from the Global Offering are estimated to be approximately HK$105.0 million.

The Hong Kong public offer will commence at 9:00 a.m. on 18 June 2019 (Tuesday) and end at 12:00 noon on 21 June 2019 (Friday). The final offer price and the allotment results will be announced on or by 27 June 2019 (Thursday). Trading of the Group’s shares are to commence on the Main Board of SEHK on 28 June 2019 (Friday) under the stock code 1701. Shares are to be traded in board lots of 4,000 shares. Innovax Capital Limited is the Sole Sponsor of this listing, while Innovax Securities Limited and Crosby Securities Limited are the Joint Global Coordinators. Innovax Securities Limited, Crosby Securities Limited, Mason Securities Limited, BOA International Securities Limited and Haitong International Securities Company Limited are the Joint Bookrunners and Joint Lead Managers.

As part of the Global Offering, the Group and the Joint Global Coordinators have entered into cornerstone investment agreements with two cornerstone investors, namely Navibell Venture Corp. (“Navibell”) and Mr. Sheng Sen, who have agreed to subscribe for such number of Offer Shares (rounded down to the nearest whole board lot of 4,000 Shares) which may be purchased for amount of HK$25.0 million and HK$2.0 million, respectively.

Navibell is a limited liability company incorporated in the BVI and is principally engaged in investment. It is wholly owned by Colombo Development Limited, which is wholly owned by Equity Trustee Limited as trustee of The XIE Family Trust. Mr. Xie Shihuang, an independent third party, is the settlor and a discretionary beneficiary of The XIE Family Trust.

Investment Highlights

Well-positioned to capitalise on the strong market potential of PRC outbound travel to Japan

According to Frost & Sullivan, Japan is one of the most popular outbound tourism destinations for Chinese outbound tourists. The number of Chinese outbound tourists to Japan increased at a CAGR of 26.7% from approximately 3.2 million in 2014 to approximately 8.4 million in 2018, much higher than the CAGR of approximately 10.9% for all outbound tourists. More tourists from Eastern China travel to Japan than any other domestic region. The number of outbound tourists to Japan from Eastern China witnessed a rapid CAGR of 32.4%, increasing from approximately 0.7 million in 2014 to approximately 2.3 million in 2018, and accounting for approximately 27.3% of the total number of outbound tourists to Japan from the PRC in 2018.

For FY2018, the Group ranked fifth in Eastern China in terms of revenue of outbound tourism to Japan. To tap the huge market potential, the Group is dedicated to establishing its market presence in Japan. In 2015, the Group has established its first wholly owned subsidiary in Japan, namely Tuyi Group Japan, in order to help manage its package tour business in Japan. In September 2015, the Group invested in and acquired the Shuzenji Onsen Hotel Takitei (the “Shizuoka Hotel”), and in late 2016, it acquired two plots of land in Ueno, Tokyo, for construction of Hotel Comfact (the “Tokyo Hotel”) The Tokyo Hotel started to generate revenue since its commencement of operation in October 2018, and is currently available for booking on established online hotel reservation platforms such as Agoda, Expedia, Booking.com, Ctrip.com, Rakuten Travel and Jalan.net.

In order to further expand the customer base, the Group began to provide local tour products in Zhejiang Province, PRC in April 2019. As at the Latest Practicable Date , the Group provides 13 domestic day tours in the PRC. Moreover, to support its strategy in establishing sales network in Hong Kong, the Group has entered into two business cooperation agreements with two local travel agencies in Hong Kong respectively in March 2019. Pursuant to the agreements, all parties should benefit from their respective established customer bases.

To maximise its ownership advantage of the Tokyo Hotel and to broaden its revenue sources, the Group also opened the duty-free shop (“Tokyo Duty-free Shop”) on the ground floor of the Tokyo Hotel with a gross floor area of approximately 65.2 m2 on the ground floor in January 2019 for the sale of over-the-counter drugs, cosmetics and daily necessities to the Group’s FIT and package tour customers, and any other walk-in visitors or tourists. In March 2019, the Group has opened a virtual store on the online platform for the sale of merchandise at its Tokyo Duty-free Shop to customers who have registered as members of its virtual store.

Established presence and brand name as well as good business relationships with services providers

In the decade since its founding, the Group has developed the “Tuyi” brand as a a well-known brand synonymous with one-stop personalised travelling service, winning numerous awards and honours. The Group has also maintained good business relationships with travel service providers, such as airline operators, hotel operators, and land operators, which cannot be easily replicated by others. This advantage has allowed the Group to differentiate itself from its competitors and ensures a stable supply of air tickets and hotel accommodations, etc., from its suppliers. Its strong selling capabilities and good business relationships with airline operators have also enabled the Group to obtain a wide selection of private fares from top airlines, including All Nippon Airways and Japan Airlines, thereby enjoying pricing advantage.

Besides, the Group has maintained stable business relationships with other suppliers including land operators and hotels at destination countries especially in Japan. Land operators with sound local knowledge can furnish the Group with the latest travel information and assist it in the development of new itineraries from time to time.

Comprehensive sales network and diversified travel and service packages

As e-commerce becomes increasingly popular in China, the Group believes the growth in its online sales is in line with the purchase and consumption behaviour patterns of Chinese travellers in recent years. This will present the Group with opportunities for sales growth and diversification. Since there are no geographical restrictions for online sales, the Group is able to extend the outreach of its travel products and services to consumers across China.

The Group has been working closely and cooperating with online sales platforms and online travel agencies. The Group has opened stores on the online sales platform of four service providers including qyer.com, Fliggy, Mafengwo and WeChat, as well as cooperated with various hotel booking platforms and online travel agencies including Agoda, Expedia, Booking.com, Ctrip.com, Rakuten Travel, Jalan.net and Ly.com.

Experienced management team with proven track record

The Group boasts a dedicated and experienced management team with a deep understanding of the travel industry in China. The Group’s founders including Mr. Yu Dingxin, Mr. Pan Wei and Mr. Xu Jiong, have more than 20 years of experience in either the travel and tourism or hospitality industry. In addition, the Group has built a loyal, experienced and capable senior management team as well as a team of committed and well-trained frontline staff.

Growth Strategies

Looking ahead, the Group plans to further broaden its product portfolio, explore new destinations and develop new itineraries for existing tours to give customers a new and different travel experience. The Group also monitors market trends regularly and carefully utilises its accumulated tour package development know-how and market insights to meet new and evolving market demand trends.

Since the Group’s focus and strategy is to provide Japan-related travel packages, it will continue to identify and pursue hospitality asset acquisition opportunities in Kyoto and invest in a travel agency company in Tokyo with established sales channels and local travel packages for new destinations that would cater for the needs of Chinese tourists. The Group intends to acquire a small to mid-sized traditional Japanese home with an annual revenue of approximately RMB6.0 million and convert it into a bed and breakfast guesthouse, also known as minshuku in Japan. In addition, the Group can provide more travel package offerings to a wider customer base through strategic alliances with other travel agencies. It also plans to recruit more tour guides based in Japan so that it can better control the quality of its tour services in Japan and thereby provide a more personalised and meaningful travel experience to customers.

The Group will utilise its successful experience in the China market to introduce its travel products and services to Hong Kong, a new market. In view of this, the Group will set up new office(s) in Hong Kong and build both an online and offline sales network to strengthen its land operation capability and recruit more staff in the future.

Use of Proceeds

Assuming an offer price of HK$0.60 per offer share, being the mid-point of the indicative offer price range, and deducting the underwriting commissions and other expenses in connection with the Global Offering, the Group expects to raise net proceeds of approximately HK$105.0 million from the Global Offering if the Over-allotment Option is not exercised. The Group intends to use the net proceeds from the Global Offering for the following purposes:

Use / Approximate
Invest in a travel agency company in Tokyo, Japan: 20%
Acquire hospitality asset in Kyoto, Japan: 20%
(i) Establish sales network in Hong Kong;
(ii) Expand its customer base by opening new office(s) in Hong Kong in the next two years;
(iii) for the operation of its new Hong Kong office(s); and
(iv) for hiring of personnels to be based at its Hong Kong office(s): 20%
Recruit more personnel in Japan: 15%
Purchase tour buses and the engagement of third party tour bus operators: 13%
General working capital: 10%
Enhance product portfolio by developing new products and services: 2%

Financial Highlights

For the Financial Year Ended 31 December
2016 2017 2018
Revenue (RMB’000) 227,830 168,867 205,051
Gross Profit (RMB’000) 47,512 48,965 48,986
Gross Profit Margin (%) 20.9 29.0 23.9
Adjusted Net Profit* (RMB’000) 14,961 21,643 22,608
Adjusted Net Profit Margin* (%) 6.6 12.8 11.0
*Excludes listing expenses

About Tu Yi Holding Company Limited
Founded in 2008, the Group is a well-established and active outbound travel package and services provider in the PRC, with a particular focus on the provision of Japan-bound package tours and related FIT products to customers in Eastern China. The Group is principally engaged in (i) the design, development and sale of outbound travel package tours and day tours; (ii) the design, development and sale of FIT products; (iii) the provision of visa application processing services; (iv) the provision of other ancillary travel-related products and services; and (v) the operation of the Shizuoka Hotel and Tokyo Hotel both of which are owned by the Group.

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