1st proof - 13 August 2024
THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION
If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult your licensed securities dealer, bank manager, solicitor, professional accountant or other professional adviser.
If you have sold or transferred all your shares in P.B. Group Limited (the ''Company''), you should at once hand this circular to the purchaser or the transferee or to the bank, licensed securities dealer or other agent through whom the sale or transfer was effected for transmission to the purchaser or the transferee.
Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.
(incorporated in Cayman Islands with limited liability)
(Stock code: 8331)
MAJOR TRANSACTION
RENEWAL OF FINANCIAL GUARANTEE
A letter from the Board is set out on pages 4 to 9 of this circular.
The transaction being the subject matter of this circular has been approved by written shareholders' approval pursuant to Rule 19.44 of the GEM Listing Rules in lieu of a general meeting of the Company. This circular is being despatched to the Shareholders for information only.
This circular will remain on the Stock Exchange's website at www.hkexnews.hk on the ''Latest Company Announcements'' page for at least seven days from the date of its publication and on the website of the Company at www.thepbg.com.
27 August 2024
CHARACTERISTICS OF GEM
GEM has been positioned as a market designed to accommodate small and mid- sized companies to which a higher investment risk may be attached than other companies listed on the Exchange. Prospective investors should be aware of the potential risks of investing in such companies and should make the decision to invest only after due and careful consideration.
Given that the companies listed on GEM are generally small and mid-sized companies, there is a risk that securities traded on GEM may be more susceptible to high market volatility than securities traded on the Main Board and no assurance is given that there will be a liquid market in the securities traded on GEM.
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CONTENTS
Page
Characteristics of GEM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Appendix I - Financial information of the Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Appendix II - General information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
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DEFINITIONS
In this circular, unless the context otherwise requires, the following expressions shall have the following meanings:
''2023 Agreement'' | the back-to-back guarantee agreement dated 28 July 2023 |
and entered into between the Wuhu Subsidiary and the | |
Borrower to renew the back-to-back agreement dated 28 | |
July 2022, details of which were set out in the | |
announcement of the Company dated 28 July 2023 | |
''Announcement'' | the announcement made by the Company dated 30 July |
2024 regarding the provision of the Guarantee | |
''Bonus Eventus'' | Bonus Eventus Securities Limited, a company incorporated |
in the Hong Kong with limited liability which is wholly | |
owned by Value Dynasty Limited, which is in turn, wholly | |
owned by P.B. Financial Group Limited. P.B. Financial | |
Group Limited which is owned as to 50% by Dr. Chan and | |
50% by Mr. Pui | |
''Borrower'' | Wuhu Haiyuan Copper Industrial Co., Ltd* (蕪湖市海源銅 |
業有限責任公司), a company established in the PRC and | |
an Independent Third Party | |
''Company'' | P.B. Group Limited, a company incorporated in the |
Cayman Islands with limited liability, the issued shares of | |
which are listed on GEM of the Stock Exchange (stock | |
code: 8331) | |
''connected person(s)'' | has the same meaning ascribed thereto under the GEM |
Listing Rules | |
''Director(s)'' | the director(s) of the Company |
''Dr. Chan'' | Dr. Chan Man Fung, the Co-chairman of the Company and |
an executive Director | |
''GEM'' | GEM of the Stock Exchange |
''GEM Listing Rules'' | the Rules Governing the Listing of Securities on GEM of |
the Stock Exchange | |
''Group'' | the Company and its subsidiaries |
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DEFINITIONS | |
''Guarantee'' | the financial guarantee to the Borrower for procuring it to |
obtain the loan provided by the lending bank with | |
principal amount of RMB19 million (equivalent to | |
approximately HK$20.8 million) by means of the Wuhu | |
Subsidiary entering into a guarantee contract for the | |
pledge of its deposit in the sum of RMB20 million | |
(equivalent to approximately HK$21.9 million) with the | |
lending bank | |
''Hong Kong'' | the Hong Kong Special Administrative Region of the PRC |
''Independent Third Party(ies)'' | any person(s) or company(ies) and their respective |
ultimate beneficial owner(s) whom, to the best of the | |
Directors' knowledge, information and belief having made | |
all reasonable enquiries, are third party(ies) independent of | |
the Company and its connected persons | |
''Latest Practicable Date'' | 22 August 2024, being the latest practicable date for |
ascertaining certain information for inclusion in this | |
circular prior to the printing of this circular | |
''Mr. Pui'' | Mr. Pui Wai Lun, the Co-chairman of the Company and an |
executive Director | |
''P.B. Asia'' | P.B. Asia Holdings Limited, a company incorporated in |
British Virgin Islands with limited liability which is owned | |
as to 50% by Dr. Chan and 50% by Mr. Pui | |
''PRC'' | the People's Republic of China, and for the purpose of this |
circular, excludes Hong Kong, the Macau Special | |
Administrative Region of the PRC and Taiwan | |
''Renewal Agreement'' | the back-to-back guarantee agreement dated 30 July 2024 |
and entered into between the Wuhu Subsidiary and the | |
Borrower in relation to the Guarantee | |
''Share(s)'' | ordinary share(s) of HK$0.1 each in the share capital of |
the Company | |
''Shareholder(s)'' | shareholder(s) of the Company |
''Stock Exchange'' | The Stock Exchange of Hong Kong Limited |
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DEFINITIONS | |
''Wuhu Subsidiary'' | Wuhu Feishang Non-metal Material Co., Limited* (蕪湖⾶ |
尚⾮⾦屬材料有限公司), a wholly-owned subsidiary of the | |
Company established in the PRC | |
''HK$'' | Hong Kong dollar(s), the lawful currency of Hong Kong |
''RMB'' | Renminbi, the lawful currency of the PRC |
''%'' | per cent. |
The provision of English translation of names in Chinese language which are marked with ''*'' are not official names but are provided for identification purposes only.
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LETTER FROM THE BOARD
(incorporated in Cayman Islands with limited liability)
(Stock code: 8331)
Executive Directors: | Registered office: |
Dr. CHAN Man Fung (Co-chairman) | 71 Fort Street |
Mr. PUI Wai Lun (Co-chairman) | P.O. Box 500, George Town |
Mr. PANG Ho Yin | Grand Cayman KY1-1106 |
Ms. ZONG Yan | Cayman Islands |
Independent non-executive Directors: | Principal place of business in Hong Kong: |
Mr. CHAN Ka Wai | Room 1601, 16/F |
Mr. CHOW Chi Hang Tony | Park Commercial Centre |
Dr. KWOK Hiu Fung | 180 Tung Lo Wan Road |
Causeway Bay | |
Hong Kong | |
27 August 2024 | |
To the Shareholders | |
Dear Sir or Madam, |
MAJOR TRANSACTION
RENEWAL OF FINANCIAL GUARANTEE
1. INTRODUCTION
References are made to the Announcement.
The purpose of this circular is to provide you with, among other things, (i) further details of the financial assistance to be provided by the Company to the Borrower; (ii) financial information of the Group; and (iii) other information in accordance with the GEM Listing Rules.
2. PROVISION OF THE GUARANTEE TO THE BORROWER
Wuhu Subsidiary has been providing financial guarantee to the Borrower for procuring it to obtain a loan of RMB19 million (equivalent to approximately HK$20.8 million) provided by Huishang Bank (徽商銀⾏) in the PRC (the ''Lending Bank'') by entering into a guarantee contract for the pledge of its deposit in the sum of RMB20 million (equivalent to approximately HK$21.9 million) with the Lending Bank since 2018.
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LETTER FROM THE BOARD
Wuhu Subsidiary and the Borrower has entered into the Renewal Agreement, pursuant to which the Wuhu Subsidiary has agreed to provide financial guarantee to the Borrower by means of pledging its deposit in the sum of RMB20 million and in return the Wuhu Subsidiary shall receive a guarantee fee of 6% of the amount of deposit pledged by the Wuhu Subsidiary.
A brief summary of the Renewal Agreement is set out below:
(a) | Date | : | 30 July 2024 |
(b) | Parties | : The Borrower; and Wuhu Subsidiary | |
(c) | Purpose | : To provide financial guarantee to the Borrower for procuring | |
it to obtain the loan provided by the lending bank in the PRC | |||
with principal amount of RMB19 million (equivalent to | |||
approximately HK$20.8 million) | |||
(d) | Guarantee Fee | : 6% of the amount deposit pledged by the Wuhu Subsidiary | |
payable annually to Wuhu Subsidiary by the Borrower | |||
(determined after making reference to the guarantee fee | |||
charged by other guarantors in similar transaction Note 1) | |||
(e) | Security | : The Borrower shall provide security of its main products | |
comprising electrolytic copper, copper rod and copper busbar | |||
with market value of not less than RMB20 million during the | |||
term of the Guarantee. In the event that the market value of | |||
the security falls below RMB20 million at any time during | |||
the term of the Guarantee, the Borrower shall provide | |||
additional security to meet the shortfall upon request by the | |||
Wuhu Subsidiary | |||
(f) | Term | : | One year commencing from 31 July 2024 to 31 July 2025 |
Note 1:MThe Company made reference to the guarantee services provided by Jinshang Bank, a commercial bank in China, which is an Independent Third Party. According to a notice issued by Jinshang Bank, Jinshang Bank charges up to 5% of the guarantee balance per annum for the provision of financial guarantee services. Jinshang Bank also charges up to 1% of the guarantee balance as assessment fee. The Company has also enquired other banks in the PRC, and noted that the guarantee fees charged by those banks for the provision of guarantee services fall within a similar range. Based on the above, the Company considers the guarantee fee charged by Wuhu Subsidiary is fair and reasonable.
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LETTER FROM THE BOARD
3. REASONS FOR AND BENEFITS OF THE PROVISION OF FINANCIAL ASSISTANCE
The Group is principally engaged in (i) bentonite mining; (ii) the production and sales of drilling mud and pelletising clay; (iii) financial service business, including money lending business and wealth management services in Hong Kong as well as generating financial guarantee fee income in the PRC and (iv) rental business.
As disclosed in the annual report of the Company for the year ended 31 March 2024, in the past year, the government has determined to step up policy efforts to stimulate the economy. A series of targeted expansionary fiscal and monetary policies and highly supportive industrial policies have been and will continue to be successively implemented to speed up recovery and stabilize growth, which will lend steady support to urban infrastructure construction as well as bentonite demand. The iron and steel industry and the building materials industry are expected to slowly recover, as the real estate industry would expect to see more policy support in various innovative ways. Investment in the ''Three Major Projects'' under the new development model for the real estate sector - the construction of affordable housing, the development of ''dual use'' public infrastructure, and urban renewal projects - is expected to partially offset the decrease in capital expenditures by real estate enterprises. In the near future, the demand for bentonite products will recover slowly, and the profit margin of bentonite products is expected to remain stable. Nonetheless, faced with the complex and ever-changing environment in the future, the Board considers that the provision of Guarantee in favour of the Borrower will better utilise the Group's cash in return for a stable interest income (i.e. the annual guarantee fee from the Borrower and the normal bank deposit interest income).
As at the Latest Practicable Date, the annual guarantee fee under the 2023 Agreement in the amount of RMB1.2 million has been duly received by the Group. The Wuhu Subsidiary provided financial guarantee to the Borrower since 2018, timely payments of the annual guarantee fee under the back-to-back guarantee agreements were made by the Borrower to the Group and, to the best knowledge of the Directors, there was no default on the part of the Borrower with the lending bank. With the security provided by the Borrower, being the main products of the Borrower, the Directors consider that its financial exposure has been secured.
The market value of electrolytic cooper is determined based on (i) the price quoted on the Shanghai Futures Exchange and the Changjiang Coloured Metal Website* (⾧江有⾊⾦屬網); and
- the physical delivery unit price. The market value of cooper rod and cooper busbar are determined based on the market value of electrolytic cooper together with processing fees in accordance with industry norm. The Company conducts weekly reviews on the market price of the main products by referring to the price quoted on the Shanghai Futures Exchange and the Changjiang Coloured Metal Website. Electrolytic copper, cooper rod and cooper busbar are purchased by copper processing companies and power equipment manufacturers in order to produce materials including but not limited to copper foil and copper strips for the manufacturing of electronic components. The Directors consider that there is a liquid market for these securities
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LETTER FROM THE BOARD
as copper is one of the most commonly used metal, and in the event of default, the Company may sell the securities to various copper processing companies in Wuhu. According to the Renewal Agreement, the main products are stored in a storage where the Company have access to, in the event of default, the Company may dispose the main products in the storage.
To the Directors' best information and knowledge, the term of the loan agreement entered into between the Borrower and the Lending Bank is one year. The Company has conducted review on the financial position of the Borrower before entering into the Renewal Agreement. The Company considers that the credit risk of the Borrower under the Guarantee is low after evaluating the financial ability of the Borrower because (i) the interest payable by the Borrower to the Lending Bank amounts to less than 1% of the net asset of the Borrower for the financial years ended 31 December 2019, 2020, 2021, 15-month period ended 31 March 2023 and for the financial year ended 31 March 2024, respectively; and (ii) the 6% guarantee fee payable by the Borrower to the Group only amounts to no more than 1.5% of the net asset of the Borrower for the financial years ended 31 December 2019, 2020, 2021, 15-month period ended 31 March 2023 and for the financial year ended 31 March 2024, respectively.
As the Company has a decent understanding of the background of the Borrower and has established a good track record with the Borrower by now, the Directors are of the view that the renewal of the provision of the Guarantee with the Borrower would continue to provide an efficient and cost-effective way to utilise the Group's cash to secure reasonable return for the Company and its Shareholders as a whole.
In view of the foregoing, the Board considers that the annual guarantee fee from the Borrower together with the normal bank deposit interest income under the Renewal Agreement could generate a stable source of revenue for the Group. To the best knowledge, information and belief of the Directors after having made all reasonable enquiries, the use of the renewed loan by the Borrower with the lending bank is for working capital purpose.
The Directors consider that the terms and conditions of the Renewal Agreement are fair and reasonable and on normal commercial terms and are in the interests of the Company and the Shareholders as a whole.
4. INFORMATION ON THE BORROWER
To the best knowledge, information and belief of the Directors after having made all reasonable enquiries, the Borrower is a company established in the PRC in 1996 with a registered capital of RMB32 million principally engaged in manufacture and subcontracting of nonferrous metals in the PRC and its main products are copper rod, copper busbar, high frequency resistance welding copper wire and other copper materials. To the best knowledge, information and belief of the Directors after having made all reasonable enquiries, the Borrower and its ultimate beneficial owner, namely, Mr. Zhou Tianliang are Independent Third Parties.
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