HK$’000 % HK$’000 % HK$’000 % HK$’000 % …...Tender success rate 19.1% 53.8% 15.4% 84.6%...

OVERVIEW

Established in 1984, we are one of the leading property management services providers inHong Kong primarily targeting residential properties.

According to the F&S Report, we ranked ninth in the property management services marketin Hong Kong in terms of revenue in 2018, with a market share of approximately 0.6%. Inaddition to the provision of property management and related services, we also generatedrevenue from our rental services and money lending business. The following table sets out thebreakdown of our total revenue by segment and the respective revenue recognised by our Groupfor the periods indicated:

FY2017 FY2018 FY2019 9M2019 9M2020HK$’000 % HK$’000 % HK$’000 % HK$’000 % HK$’000 %

(unaudited)

Property managementand related services– Property management

services 365,110 92.3 366,919 89.0 370,793 87.1 279,823 88.3 324,964 89.8– Stand-alone security

services 30,404 7.7 33,160 8.0 29,933 7.0 22,781 7.2 24,776 6.9– Property management

consultancyservices – – 9,498 2.3 23,327 5.5 12,915 4.1 10,199 2.8

395,514 100.0 409,577 99.3 424,053 99.6 315,519 99.6 359,939 99.5

Rental services – – 1,101 0.3 1,448 0.3 1,081 0.3 1,187 0.3Money lending business – – 1,593 0.4 160 0.1 148 0.1 678 0.2

395,514 100.0 412,271 100.0 425,661 100.0 316,748 100.0 361,804 100.0

For our principal operation of property management services and stand-alone securityservices, our property portfolio encompasses a wide variety of properties including residentialbuildings, commercial buildings, industrial buildings, schools and car parks. The largest part ofour property portfolio is residential properties, which accounts for approximately 84.8%, 84.1%,81.7% and 83.4% of the total revenue of our Group’s property management services andstand-alone security services for each of the year ended 31 March 2017, 2018 and 2019 and thenine months ended 31 December 2019, respectively.

As at 31 March 2017, 2018, 2019, 31 December 2019 and the Latest Practicable Date, wehad a total of 431, 434, 437, 444 and 442 property management contracts and stand-alonesecurity services contracts on hand, which had been relatively steady throughout the Track

THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THAT THE INFORMATION MUST BEREAD IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

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Record Period. For each of the year ended 31 March 2017, 2018 and 2019 and the nine monthsended 31 December 2019, from our provision of property management services, we generated arevenue of approximately HK$365.1 million, HK$366.9 million, HK$370.8 million andHK$325.0 million, respectively. This represented approximately 92.3%, 89.0%, 87.1% and89.8% of our total revenue, respectively, during the Track Record Period. Our revenue generatedfrom stand-alone security services amounted to approximately 7.7%, 8.0%, 7.0% and 6.8% ofour total revenue, respectively, during the Track Record Period. We started our propertymanagement consultancy services in 2018 and generated revenue of approximately HK$9.5million, HK$23.3 million and HK$10.2 million for each of the year ended 31 March 2018 and2019 and the nine months ended 31 December 2019, representing approximately 2.3%, 5.5% and2.8% of our total revenue, respectively, for the same period.

Although we have been focusing on the provision of residential property management inHong Kong, our Directors also pay attention to the development of the PRC propertymanagement market. With the rapid development of the real estate market in the PRC and theincrease of owners’ awareness of property management services, the demand for propertymanagement levels and property services in the PRC continues to increase. Our managementstarted to conduct some studies on the property management market in the PRC in 2017 and weset up Zibo Yue, a sino-foreign equity joint venture, in Shandong Province, the PRC on 18December 2017 to start our business in the PRC.

On 29 March 2019, we acquired the entire issued share capital of Shi Shi Property Caymanwhich is the ultimate holding company of each of HS Property and Shandong HS which enabledus to expand our property management business in the PRC. In respect of our propertymanagement business in the PRC, we provide a range of property management services, such assecurity, cleaning and customer service management in Shandong Province, the PRC, and hadour customers under this business mainly include 24 customers, which are mainly owners’committees, corporates and government authorities during the Track Record Period. During theTrack Record Period, we had provided such services mainly to 22 properties, all located inShandong Province, the PRC, which are mainly residential properties, commercial properties andpublic facilities. Except for 2 out of those 24 customers of our property management services inthe PRC, which are the associates of Mr. Huang, one of our Controlling Shareholders, to the bestknowledge of our Directors, no customer (including their ultimate beneficial owner(s), directorsand senior management) had or have any relationship (business, financing or otherwise) with ourCompany, our subsidiaries, our Controlling Shareholders, Directors, senior management or anyof their respective associates, whether the past since 29 March 2019 or present. The revenuecontribution from the two customers, each being associates of Mr. Huang, in relation to ourproperty management business in the PRC amounted to approximately HK$0.9 million for thenine months ended 31 December 2019, which represented approximately 2.6% of our totalrevenue in the PRC for the same period. Our Directors (including our independent non-executiveDirectors, other than Mr. Huang who is interested in the transaction and has abstained), confirmthat the transactions with the said two customers are conducted on normal commercial terms andare fair and reasonable. Please refer to the section headed “Connected Transactions – Overview– Fully exempt continuing connected transactions – 2. Property management frameworkagreement” in this [REDACTED] document for details of the agreement between our Companyand 恒生地產有限公司 (Heng Sheng Property Limited*) (“HSPL”), a company wholly-owned byMr. Huang, pursuant to which our Group agreed to provide preliminary property management


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services to certain properties developed by HSPL and its subsidiaries. We intend to furtherexpand our property management and consultancy services in the PRC so as to increase ourmarket share in the PRC markets. For details of our business strategies, please refer to theparagraph headed “Business – Business strategies” in this [REDACTED] document.

During the Track Record Period, in addition to the provision of property managementservices, a portion of our revenue was derived from (1) rental income from investment property;and (2) loan interest income from money lending business. We completed the acquisitions ofFortune Trend and More Rise, our subsidiaries principally engaged in properties investment, on31 March 2017, when we started our rental service. We obtained the money lenders licence on15 June 2017 and first loan was granted to an Independent Third Party on 17 July 2017, detailsof which has been disclosed in our Company’s announcement dated 17 July 2017. For each ofthe year ended 31 March 2017, 2018 and 2019 and the nine months ended 31 December 2019,from our investment property, we generated revenue of HK$nil, approximately HK$1.1 million,HK$1.4 million and HK$1.2 million, representing 0%, approximately 0.3%, 0.3% and 0.3% ofour total revenue, respectively. Furthermore, for each of the year ended 31 March 2017, 2018and 2019 and the nine months ended 31 December 2019, from our money lending business, wegenerated revenue of HK$nil, approximately HK$1.6 million, HK$0.2 million and HK$0.7million, representing 0%, approximately 0.4%, 0.1% and 0.2% of our total revenue, respectively.

As the rental service and money lending business only generate a small portion of our totalrevenue or to certain extent relating to our principal business, there is no material change of ourGroup’s business since the [REDACTED] of our Group on GEM.

COMPETITIVE STRENGTHS

We compete with other property management companies in bidding for service contracts ofboth private and public properties. Our Directors believe that the following competitive strengthsare key to our proven track record which will contribute to the stability and future growth of ourGroup.

We have a sound quality control and business processing system

Our Directors believe that the continued success of our business primarily depends on ourability to meet our customers’ requirements, particularly relating to safety, environmental andquality aspects.

We have a sound quality control and business processing system. We have been accreditedwith the ISO 9001:2015 Quality Management System, the ISO 14001:2015 EnvironmentalManagement System and OHSAS 18001:2007 Occupational Health and Safety AssessmentSeries. We adopt a set of stringent internal control policies in accordance with the relevant ISOrequirements. With the control policies in place, we can consistently deliver quality services tocustomers that meet their requirements. A systematic evaluation is also in place to carry outsystem enhancements to ensure customer satisfaction.


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We have a wide customer base

Instead of relying on revenue from a few major customers, the sources of income for ourGroup are widespread. The termination of any single contract would have a limited effect on ourGroup’s income flow or business operation. On the other hand, apart from residential buildings,our Group’s management portfolio comprises a range of other property types, such ascommercial buildings, industrial buildings, schools and car parks, which enables our Group toestablish a broad base of property management expertise to further expand its property portfolio.

During the Track Record Period, our business has been relatively steady, meanwhile thetotal number of projects on which we provide our property management or stand-alone securityservices has also remained relatively steady, with a slight increase from 431 as at 31 March2017 to 434 as at 31 March 2018, and has further increased to 437 as at 31 March 2019 and 444as at 31 December 2019. As at the Latest Practicable Date, we had a total of 442 contracts towhich we provide property management or stand-alone security services, covering approximately75,000 units.

We have a professional management team with accredited qualifications and substantialexperience

As at the Latest Practicable Date, 10 full-time staff of our Group were members of at leastone of the following professional bodies: (i) The Hong Kong Institute of Housing; (ii) CharteredInstitute of Housing; and (iii) Registered Professional Housing Manager and at least eight ofthem have held the qualification for over 10 years. Our senior management have, on average,about 20 years of experience in the property management industry and a majority of them haveserved us for more than 16 years.

The experience of our management team is essential for us in securing new servicecontracts, and the efficient and timely implementation and management of each property. Pleaserefer to the section headed “Directors, senior management and staff” in this [REDACTED]document for further details of our Directors and senior management.

We believe that the combination of our management’s expertise, relationship with ourcustomers and knowledge of the industry, together with our employees, is essential to ourcontinued success and would enable us to seize market opportunities, formulate effectivebusiness strategies, evaluate and control risks, implement management plans, and enhance ourprofitability.


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BUSINESS STRATEGIES

We plan to take on additional property management projects and expand our coverage

We principally operate in Hong Kong and as at the Latest Practicable Date, we weremanaging over 400 projects. In the coming years, our Directors intend to further develop ourbusiness by tendering more property management projects in Hong Kong. According to the F&SReport, in terms of building types, residential properties contributed to the largest portion of therevenue generated from property management services in Hong Kong. The revenue of residentialproperty management services in Hong Kong has grown at a CAGR of 5.4% from approximatelyHK$35.8 billion in 2014 to approximately HK$44.2 billion in 2018. It is forecasted that thesector will continue its growth at a CAGR of 6.0% from 2019 to 2023 and attain approximatelyHK$58.9 billion by the end of 2023.

During the Track Record Period, the revenue generated from the PRC accounted to HK$nil,approximately HK$9.5 million, HK$27.1 million and HK$36.2 million, representing 0%,approximately 2.3%, 6.4% and 10.0% of the revenue from property management and relatedservices, respectively. According to the F&S Report, the primary property management servicesin the PRC involve the control and operation of real estate management, as well as otherservices, such as consulting services and value-added services. The market size of propertymanagement services in the PRC has increased in 2014 to 2018 from approximately RMB207.6billion to RMB293.7 billion, with a CAGR of 9.0%. In 2023, the total market size is expected toreach approximately RMB440.0 billion with an expected CAGR of 8.3% from 2019 to 2023,according to the F&S Report. We intend to further expand our property management andconsultancy services in the PRC or develop other property related services in the PRC so as toincrease our market share in the PRC markets.

In addition, we explore or expand into markets other than Hong Kong if and when suitableopportunities arise, including market of the PRC. We will conduct business development studiesand feasibility studies before expanding into other regions.

Further, although the permitted business scope of Zibo Yue, Shandong Yue, Shishi Networkand Huan Tai Shishi Health covers “health information consultation services”, “elderly careservices”, “computer system services” and “hosting exhibition services”, our Group did notconduct any of the aforesaid businesses during the Track Record Period. Our Group may expandinto any of the aforesaid businesses going forward to complement our existing propertymanagement services. As part of our Group’s development in the PRC property managementmarket, Shishi Network was established for the purpose of providing computer networktechnology support for health information consultancy and elderly care services in thecommunity and we had planned to start piloting services in relation to health informationconsultancy and elderly care services in one community and officially launch our value-addedproperty service experience centre (增值物業服務體驗中心) in Beijing, the PRC and communityvalue-added property services centre (社區增值物業服務中心) in Hengtai County, Zibo City,Shandong Province, the PRC with further promotion of our services after a six months’ trialoperation. However, our Directors confirm that, due to the recent outbreak of COVID-19, ourplans have been put on hold as at the Latest Practicable Date (for details, please refer to thesection headed “Financial information – Recent development” in this [REDACTED] document).


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Our Directors will continue to assess the impact of the outbreak and closely monitor the risksand uncertainties in connection with the pandemic and the timeline of our plan is subject tofurther development of the outbreak and government advice, bans and/or restrictions that mayarise in the future. Our Directors further confirm that the provision of computer networktechnology support for health information consultancy and elderly care services will be avalue-added service to our customers as a part of our property management services, targetingowners of the properties under our management and to meet the actual demand of the propertyowners in their daily life, such as health care and elderly care. Our Directors believe that toprovide a one-stop and comprehensive service is the trend in the industry and such value-addedservices will be an extension and indispensable part of our current traditional propertymanagement services.

Enhancing our branding and marketing activities

We seek to strengthen our market position by improving our branding and brand awareness.Our Directors believe that our success is directly attributable to our strong reputation in thecommunity. We established our reputation gradually by providing high quality of service. OurDirectors believe that if the customers are satisfied with our services, they may recommend us tomembers of other owners’ corporations through their personal networks, thus increasing thechances of success in future tenders of other projects.

During the Track Record Period, we did not organise any direct advertising activities, butwe are active in taking part in social activities to gain public exposure and enhance publicawareness. From time to time our Directors and members of the senior management attenddifferent district community events, where they can meet with members of owners’ corporationsfrom different districts. These social networking events provide a perfect platform for us toreach out to new potential customers.


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We believe word of mouth is the best marketing tool in our industry. Going forward, weintend to participate in more community events and get connected with the community toenhance our branding, image and the brand awareness of our Group.

Upgrade our own information technology system

Certains aspects of our financial management are conducted manually, including theissuance of invoices and cheques and debt collection. To improve our internal accounting systemwith easier access and faster processing times to allow for better integration with existingprocesses, we intend to enhance our current information technology system by upgrading ourfinancial management software to assist in our monthly billing, payment automation, to lowerthe chance of human error and increase overall efficiency, to better support our businessoperations. We believe this would allow us to better manage our customers and employees andimprove our overall service quality.

Strengthen our human resources and human resource management

Property management is a labour intensive industry and as at the Latest Practicable Date,we employed over 1,700 employees for our business operation. We believe that a strong team ofstaff members with industry knowledge and experience is crucial to our continuing success.

Going forward, we intend to tender for more property management projects. In order tocater for the growing demand, we intend to expand our human resources by recruitingexperienced or skilled staff members, in particular property managers, in order to drive ourbusiness development.

In addition, we intend to enhance our human resource management by continuing to holdvarious training workshops or courses for our employees in relation to industry knowledge,management skills and work safety.

OUR BUSINESS OPERATIONS

We principally engage in the provision of property management and related services. Inaddition, we also engage in rental services and money lending business. Brief descriptions of ourbusiness segments are summarised below:

• Property Management and Related Services – We operate under the brand name of“Kong Shum” in Hong Kong and provide a range of management services includingsecurity, repair and maintenance, cleaning, finance management, administrative andlegal support in Hong Kong and property management and consultancy services in thePRC.


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In order to provide the security services under property management service contractsor under stand-alone security services contracts, we employ a team of security staff.We also employ registered technicians to provide basic repair and maintenanceservices to our customers if required. In relation to the cleaning services, wesubcontract substantially all of our cleaning services to third-party contractors. Ourproperty management consultancy services mainly include assisting the propertymanagement companies to establish the property management system, providing stafftraining to the property management companies and assisting in the development anddocumentation for customers’s system integration.

• Rental Services – We generated rental income from leasing out our investmentproperty during the Track Record Period.

• Money Lending Business – During the Track Record Period, we granted a total of fiveloans to Independent Third Parties.

The following table sets out the breakdown of our total revenue by segment and therespective revenue recognised by our Group for the periods indicated:


(unaudited)

Property management andrelated services 395,514 100.0 409,577 99.3 424,053 99.6 315,519 99.6 359,939 99.5

Rental services – – 1,101 0.3 1,448 0.3 1,081 0.3 1,187 0.3Money lending business – – 1,593 0.4 160 0.1 148 0.1 678 0.2

395,514 100.0 412,271 100.0 425,661 100.0 316,748 100.0 361,804 100.0

The following table sets out the breakdown of our revenue generated from the PRC by thetype of services provided for the periods indicated:

FY2017 FY2018 FY2019 9M2019 9M2020HK’000 HK’000 HK’000 HK’000 HK’000

(unaudited)

Property management services – – 3,803 3,690 25,957Property management

consultancy services – 9,498 23,327 12,915 10,199

– 9,498 27,130 16,605 36,156


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The revenue derived from property management services in the PRC substantially increasedduring the nine months ended 31 December 2019 mainly due to the acquisition of Shi ShiProperty Cayman, the ultimate holding company of each of HS Property and Shandong HS,which brought in more customers.

PROPERTY MANAGEMENT AND RELATED SERVICES

We are a property management and related services group principally engaged in theprovision of residential property management services in Hong Kong, and we also commencedthe provision of property management and consultancy services in the PRC in 2018. For each ofthe year ended 31 March 2017, 2018 and 2019 and the nine months ended 31 December 2019,the revenue generated from our PRC operation amounted to HK$nil, approximately HK$9.5million, HK$27.1 million and HK$36.2 million, corresponding to 0%, approximately 2.3%, 6.4%and 10.0% of the revenue from property management and related services, respectively. As partof our services, we also provide stand-alone property security services in Hong Kong to ourcustomers mostly through Q&V and Yorkshire.


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The table below sets out the breakdown of revenue generated from the propertymanagement and related services for the periods indicated:

FY2017 % FY2018 % FY2019 % 9M2019 % 9M2020 %HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

(unaudited)

Property management and related services– Property management services 365,110 92.3 366,919 89.6 370,793 87.4 279,823 88.7 324,964 90.3– Stand-alone security services 30,404 7.7 33,160 8.1 29,933 7.1 22,781 7.2 24,776 6.9– Property management consultancy

services – – 9,498 2.3 23,327 5.5 12,915 4.1 10,199 2.8

395,514 100.0 409,577 100.0 424,053 100.0 315,519 100.0 359,939 100.0

The following table sets out the revenue generated from property management service andstand-alone security services for different types of properties for the periods indicated:


(unaudited)

Residential properties 335,290 84.8 336,470 84.1 327,512 81.7 245,406 81.1 291,560 83.4Non-residential properties

– commercial buildings 13,064 3.3 15,127 3.8 19,459 4.9 15,814 5.2 11,779 3.4– industrial buildings 35,289 8.9 36,315 9.1 41,914 10.5 32,232 10.7 34,173 9.8– schools 1,329 0.3 1,174 0.3 837 0.2 617 0.2 145 0.0– car parks 607 0.2 718 0.2 744 0.2 553 0.2 597 0.2– arcade 8,564 2.2 9,584 2.4 9,256 2.3 6,953 2.3 7,793 2.2– government 47 0.0 – – – – – – 3,085 0.9– others 1,324 0.3 691 0.2 1,004 0.3 1,030 0.3 608 0.1

60,224 15.2 63,609 15.9 73,214 18.3 57,199 18.9 58,180 16.6

395,514 100.0 400,079 100.0 400,726 100.0 302,605 100.0 349,740 100.0

Notes:

1. A property means a building/house or multiple buildings/houses covered by one DMC/sub-DMC.Sometimes, a property developer may execute separate DMCs/sub-DMCs in respect of differentphases/blocks in the same development.


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The table below sets out the backlog of our Group’s property management servicescontracts and stand-alone security services contracts in Hong Kong and property managementservices contracts in the PRC during the Track Record Period and up to 31 March 2020:

FY2017 FY2018 FY2019 FY2020

Number of

contracts

Total

contract

sum

Number of

contracts

Total

contract

sum

Number of

contracts

Total

contract

sum

Number of

contracts

Total

contract

sum

(HK$’000) (HK$’000) (HK$’000) (HK$’000)

(1) Property managementservices contracts inHong KongBeginning of year/period 409 292,059 415 242,509 419 295,305 424 280,348Additions of new contracts/renewal of contracts(Note 1) 21 314,239 22 419,012 24 351,064 26 411,499Less: number of contracts which has been

terminated/expired,has not been re-tendered/renewedand has been performed(Note 2) 15 363,789 18 366,216 19 366,021 19 403,533

End of year/period 415 242,509 419 295,305 424 280,348 431 288,314

(2) Stand-alone securityservices contracts inHong KongBeginning of year/period 13 25,962 16 31,868 15 66,205 13 64,866Additions of new contracts/renewal of contracts(Note 1) 0 36,310 0 67,497 0 28,594 1 17,697Less: number of contracts which has been

terminated/expired,has not been re-tendered/renewedand has been performed(Note 2) 3 30,404 1 33,160 2 29,933 1 32,715

End of year/period 16 31,868 15 66,205 13 64,866 13 49,847


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FY2017 FY2018 FY2019 FY2020

Number of

contracts

Total

contract

sum

Number of

contracts

Total

contract

sum

Number of

contracts

Total

contract

sum

Number of

contracts

Total

contract

sum

(HK$’000) (HK$’000) (HK$’000) (HK$’000)

(3) Property management services contracts inthe PRCBeginning of year/period 0 0 0 0 0 0 13 24,113Additions of new contracts/renewal of contracts(Note 1) 0 0 0 0 19 27,921 4 1,700Less: number of contracts which has been

terminated/expired,has not been re-tendered/renewedand has beenperforrmed(Note 2) 0 0 0 0 6 3,808 2 2,316

End of year/period 0 0 0 0 13 24,113 15 23,497

Notes:

(1) For clarification purpose, the number of contracts only included additions of new contracts, excluding therenewed contracts, but the total contract sum includes both types of contracts.

(2) For the avoidance of doubt, the total contract sum also included the contract sum performed/contributed duringthe period, but such contract has not been terminated/expired during the period.

During the Track Record Period and up to 31 March 2020, our number of contracts haveremained relatively stable, and the terminations of our Group’s contracts were due to the expiryof such contracts which were not re-tendered by us or renewed by our customer. Our Directorsconfirm that the terminations of our contracts have been based on commercial decisions and thatthere has not been any disagreement with our customers resulting in the terminations of any ofour contracts during the Track Record Period and up to 31 March 2020.


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The tables below set out our Group’s average management service fee per sq.ft. by propertytype and property size range during the Track Record Period:

Property type FY2017 FY2018 FY2019 9M2020(HK$) (HK$) (HK$) (HK$)

PRC HK PRC HK PRC HK PRC HK

Residential properties – 0.51 – 0.56 – 0.64 0.06 0.74Non-residential properties– commercial buildings – 1.34 – 1.35 0.32 1.36 – 1.39– industrial buildings – 0.55 – 0.59 – 0.58 0.10 0.56– schools – 0.38 – 0.20 – 0.40 0.06 0.24– car parks – 32.59 – 38.99 – 7.39 – 7.76– arcade – 0.55 – 0.60 – 0.62 – 0.64– government – 0.63 – – – – 0.13 –

Approximate property size range FY2017 FY2018 FY2019 9M2020(HK$) (HK$) (HK$) (HK$)

PRC HK PRC HK PRC HK PRC HK

1,501 sq. ft. to 25,000 sq. ft – 1.64 – 1.78 – 1.77 – 2.0225,001 sq. ft to 50,000 sq. ft – 1.14 – 1.22 – 1.21 – 1.3350,001 sq. ft to 75,000 sq. ft – 0.77 – 0.80 – 0.86 – 0.9475,001 sq. ft to 100,000 sq. ft – 0.74 – 0.81 – 0.84 0.08 0.87100,001 sq. ft to 1,000,000 sq. ft – 0.58 – 0.62 0.32 0.66 0.10 0.701,000,001 sq. ft to 12,000,000 sq. ft. – 0.24 – 0.26 – 0.28 0.06 0.32


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Services

The detailed scope of property management and related services provided by us is subjectto the service contract between us and individual customer and varies from one contract toanother. The scope of property management and related services delivered by us generallyincludes the following areas:

Management activities

Our Directors believe that management activities are an important part of propertymanagement in ensuring the provision of quality services for the management of a property. Wewould assign a team of staff to oversee the day-to-day delivery of services. Property officers areresponsible for the regular inspection of the management of the properties assigned to them.They are also responsible for monitoring the hygiene level of the estate, garbage collectionfacilities and arrangement of garbage disposal. We would also coordinate the regular inspectionof building facilities for matters outside our expertise such as ventilation systems by contractingvarious specialists.

Urgent repair works are arranged or directly performed by our maintenance department orthe on-site maintenance team of the relevant property. On a monthly basis or upon request byour customers, the conditions of the estate’s facilities are reported, and necessary repairs areproposed if there are any identified significant defects which can pose a potential threat to thesafety of residents. Property management teams also monitor the renovation and maintenanceprojects that may take place within the area of the estates. All residents’ complaints are reportedto our senior management for further follow-up.

Security

KSU, Q&V and Yorkshire possess security company licences issued by the Security andGuarding Services Industry Authority pursuant to the Security and Guarding Services Ordinance,which enable us to employ a team of around 1,000 security staff in service as at 31 December2019. We provide security guarding services to ensure that properties are well maintained andthat the safety of residents and users of the properties are protected.

In general, daily security management services provided by us include patrolling, guardingthe entrance lobby, controlling vehicle access, making records of visitors and stoppingtrespassers, handling complaints and emergencies, settling and reporting disputes amongstresidents, reporting for duty during extreme weather conditions and monitoring the performanceand safety of public facilities such as lifts. For some properties, we also provide traffic controlwithin the area and issue warnings for any unauthorised parking. We provide a 24-hourcentralised control room with the responsibilities of acting as the centre of communicationbetween our headquarters and our properties and coordinating the tasks of security guards in


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cases of emergency. As at 31 December 2019, all of our security staff possess either category Aor category B or both personal security permits. Apart from daily security management routines,we also advise our customers on security planning and manpower requirements, while takinginto account the different necessities of our customers.

Although most of our property management services contracts include security services,some of our customers may opt out of our security services and engage other security servicescompanies. While Q&V and Yorkshire are security services providers under our Group, they alsobid for and provide stand-alone property security services. During the Track Record Period, weprovided property security services for 17, 14, 14 and 14 properties, respectively. As at 31March 2017, 2018 and 2019 and 31 December 2019, we had 16, 15, 13 and 13 stand-alonesecurity services contracts, respectively.

Repair and Management

As stipulated in our service contracts, we would generally carry out urgent maintenance ifnecessary and minor maintenance of a specified amount up to around HK$30,000 to ensure thebuildings are generally safe and in good repair. We are also required to make recommendationswith regards to the repair and maintenance of buildings and their facilities, or with the priorconsent of our customers, coordinate and appoint contractors to carry out the designated repairand maintenance work.

Our maintenance services are delivered by on-site maintenance technicians or ourmaintenance team. On-site maintenance technicians are provided if we have contractually agreedwith our customers for such services, which are more usual for larger scale estate-typecustomers. We will assign a specified number of technicians in the service contracts to stationand work at the customers’ sites, and the on-site technicians will respond to any request forbasic repairs and maintenance and to perform regular inspections. For other customers who donot require on-site maintenance technicians, our maintenance team will carry out the repair andmaintenance work if such needs arise. Generally, our maintenance employees may perform basicor simple repair and maintenance work in relation to electrical fittings. Other maintenance orrepair work such as lift maintenance and security system maintenance will be performed byspecialist contractors. We are responsible for coordinating and assisting our customers inengaging such specialist contractors.

Cleaning

To maintain a hygienic living environment for the residents or users of buildings under ourmanagement, we offer different levels of cleaning services in accordance with the contractterms. This varies in terms of the scope of cleaning services, frequency of cleaning and numberof cleaning staff required. The scope of cleaning services includes basic garbage collection,cleaning and sometimes sterilisation of building facilities and landscape maintenance. Theservice level of cleaning services is defined in the contract.


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We have a limited number of direct staff in providing cleaning services. Almost all of ourcleaning services are subcontracted to third-party contractors. Although some propertymanagement services contracts include cleaning services, some of our customers opt out of thecleaning services and engage other cleaning services providers to provide such services.

Financial Management

Most of our customers are owners’ corporations of properties and do not hire permanentstaff to handle daily operations. Pursuant to the Building Management Ordinance, we, as theproperty manager for our customers, are required to prepare annual budgets for managementexpenses and prepare income and expenditure statements. Generally, we are responsible forfinancial management of our customers in respect of (1) management fee collection; (2)disbursement of owners’ corporations expenditure; (3) recording and maintaining the account ofowners’ corporations; and (4) preparation of annual budgets.

As set out in the paragraph headed “Tendering” in this section, our Group’s revenue isderived from the contractual services fees received from our Group’s customers. The contractualservices fee is distinct from the property management fees paid by residents, which is theincome of the owners’ corporations. We are generally responsible for the collection of propertymanagement fees on behalf of our customers. Property management fees are normally receivedby cash, cheque or autopay. In general, for payments overdue for a month, we will issue a letteron behalf of our customers to the owners or residents of the relevant property. When thepayments are overdue for two months, a reminder will be sent requesting for payment. Theproperty management service contracts normally authorise us to take legal actions on behalf ofthe customers. A final reminder will be sent within the next month and we will commence courtproceedings at the Small Claims Tribunal on behalf of our customers to recover the outstandingmanagement fees.

At times, we are also responsible for making payments on behalf of our customers inaccordance with their budgets and the terms in service contracts. The budgets of owners’corporations prepared by us will be approved by the owners’ corporations. For non-routineexpenditure, expenditure exceeding an amount specified in our service contracts up to aroundHK$50,000 or expenditure that is not budgeted, we will generally seek approval from owners’corporations’ for payments.

Administrative and legal support

We support the administrative work of our customers in various ways. The administrativesupport includes (1) preparing and posting public notices of events and concerns in thebuildings’ public area; (2) preparing agenda and minutes for meetings of the owners’


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corporations; (3) drafting correspondences on behalf of the owners’ corporations; and (4)coordinating the performance of various property management functions by us or othersubcontractors or specialist contractors.

Disputes between customers and residents or other users of building may arise due tooverdue payment of management fee. We would assist customers to coordinate and handleclaims and litigation matters, such as filing for the recovery of management fees from residents.We also retain a legal advisor who may give some advice on simple legal matters.

Depending on the scope of services as specified in the property management servicecontracts, some property management services are beyond the responsibility of our Group. Theymay include security, cleaning and repair and maintenance. In such cases, our customers have toassign the work to third parties, normally through a tendering process. We would assist ourcustomers in the administrative work in relation to publishing notices, reviewing tenderdocuments and engaging contractors.

Consultancy services

We provide consultancy services to our customers, which are mainly property managementcompanies and property developers. Our consultancy services principally include (1) advising onthe organisation structure and functions of different departments; (2) assisting our customers toestablish the management system; (3) preparing and providing various business agreements; (4)advising on planning and budgeting; (5) advising on the implementation of property managementservices, including management fee collection and other property management related functions,such as security, cleaning and customer services; and (6) advising on the property design anddevelopment.

The underlying properties to which our property management consultancy services relatedare properties located in Shandong Province, the PRC, with the property sizes ranged between69,000 and 770,000 sq.m., which were the typical size of properties, including only a singlefloor of a building, managed by our customers of property management consultancy services.For each of the year ended 31 March 2017, 2018 and 2019 and the nine months ended 31December 2019, there were nil, nine, 17 and 4 customers involved in our property managementconsultancy business in the PRC, respectively. To the best knowledge of our Directors, thesecustomers (including their ultimate beneficial owner(s), directors and senior management) didnot or do not have any relationship (business, financing or otherwise) with our Company, oursubsidiaries, our Controlling Shareholders, Directors, senior management or any of theirrespective associates, whether past or present.

We have also set up a Hong Kong team, comprising of approximately 12 seniormanagements and professionals of KSU (including two members of our Group’s seniormanagement), to direct, supervise and support our Group’s PRC’s execution team to provide theproperty management services to Zibo Yue’s customers. During the Track Record Period, theHong Kong team would hold regular meetings with the PRC execution team to discuss andoptimise any issues concerning property management consultancy servcies.


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For each of the property management consultancy agreements entered into by our Group inthe PRC, our Group typically assigned eight to 16 of staff in the PRC to each of the respectivecustomers.

Tendering

We commenced business in 1984 and have established a wide customer base comprisingmore than 400 customers as at 31 December 2019. The principal market of our Group is HongKong and most of the properties under our Group’s management are situated in Hong Kong. Thecategories of properties managed by our Group include public and private residential estates andbuildings, commercial buildings, industrial buildings, schools and car parks. Public residentialestates include public rental housing and housing under the Home Ownership Scheme. Pursuantto the Building Management Ordinance, appointment of new property management companies byowners’ corporations should normally be made by invitation to tender.

According to the F&S Report, property management service contracts in Hong Kong,whether in the public or private sector, are generally awarded by way of open tenders or invitedtenders. For open tenders, public invitations are published in newspapers and interested partiesmay submit tenders. For invited tenders, shortlisted service providers are invited to join thetender by letter of invitation.


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We have established a series of procedures for participation in a tender. Usually our staff ofthe administrative department would search from selected local newspapers for suitabletendering advertisements placed by potential customers who are recruiting property managementcompanies and security services providers. Depending on the size and scale of the projectsadvertised and scope of services required, the tender submission documents are prepared by ourmarketing department.

The tender documents normally set out the objectives and expected standard of servicessuch as the number of security guards required and frequency of cleaning. We will first gothrough the tender documents and check if the required scope of services is within our capacity.The property management officers and the marketing department may also conduct site visits toinspect the conditions of the properties. To avoid excessive exposure to operational and legalrisks, it is in the best interest of our Group not to manage certain properties. Only if the requiredscope of services is within our capacity or capability, and the property is in an acceptablecondition, would we pursue the business opportunity and submit a tender. We generally avoidtendering for properties with the following criteria:

• the structure of the building is poorly maintained, for example there is paint peelingoff the walls or damaged smoke doors

• there are numerous public paths allowing access to the building

• there are multiple hostels or night clubs within the building

• the building contains plenty of illegal structures, especially in public areas such asterraces or rooftops

We are usually required to set out details of our proposed services plans based on therequirements of the tender documents and floor plan of the properties, such as the role, core jobtasks and the number of supervisors and security guards to be employed. Furthermore, potentialcustomers may request for tailor-made plans to improve the security of the concerned propertyas a whole, tackling the weak points of ordinary security arrangements.

Based on the expected services level and information gathered on the property, we willdetermine a price quote with reference to the estimated required costs of services and preparethe tender submission documents. The tender submission documents would generally include ourprofile, proposals for management and completed tendering forms. We may also be responsiblefor furnishing replies and attending meetings if the customers have further enquiries or requestfor a face-to-face tender interview. If we are awarded with the property management or propertysecurity services, we will receive a notification letter from the customer and enter into a servicescontract with the customer.


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The following flowchart illustrates the tendering procedures under which we acquire newproperty management or security services contracts:

Search for suitable tender advertisements

Request for tender documents from potential customers

Review tender documents

Conduct site visit and evaluate the risk

Suitable property? Turn down opportunityNo

Yes

Prepare and submit tender submission document

Interview with tenderee (if requested)

Yes

Selected by potential

customer?

Receive notification letter from customers

Yes

Enter into services contract

Meet the tendering

requirement as considered by

potential customer?

Approximately

3 months


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To the best knowledge and belief of our Directors, it normally takes three months or morefor customers to conduct tender, select and appoint a new property management company.

The table below illustrates the tender success rate of our Group during the Track RecordPeriod in respect of contracts for the property management services and property securityservices in Hong Kong:

FY2017 FY2018 FY2019 9M2020New

contractsRenewedcontracts

Newcontracts

Renewedcontracts

Newcontracts

Renewedcontracts

Newcontracts

Renewedcontracts

Number of tenderssubmitted 110 13 143 13 157 12 115 6

Number of successfultenders 21 7 22 11 23 5 23 2

Tender success rate 19.1% 53.8% 15.4% 84.6% 14.7% 41.7% 20.0% 33.3%

During the Track Record Period, we submitted an aggregate of 123, 156, 169 and 121tender bids, respectively. Our success rates for such bids were approximately 22.8%, 21.2%,16.6% and 20.7%, respectively, for the same period. As confirmed by our Directors, the numberof tenders submitted is driven by the supply and demand of property management services andproperty security services in the market of Hong Kong, and we review regularly our tendersuccess rate so as to consider whether we shall make any change to our tendering strategy.

In respect of the property management and related services in Hong Kong, most of thecontracts contain a renewal clause that allows the contracts to be renewed unless terminated byour Group or our customer, subject to the respective owners’ corporations’ approval at thegeneral meeting confirming the terms of the contract. In respect of our Group’s contractsrelating to the property management and related services in Hong Kong, 18, 19, 21 and 17contracts terminated or expired and had not been renewed or re-tendered during the TrackRecord Period, respectively. There were 420, 428, 432 and 447 repeated customers of our Groupin respect of the property management and related services in Hong Kong and our revenuegenerated from these repeating customers were approximately HK$377.8 million, HK$388.7million, HK$368.2 million and HK$321.5 million for each of the three years ended 31 March2019 and the nine months ended 31 December 2019 as compared against the immediatepreceding financial year, respectively, and a repeated customer rate of 94.0%, 94.5%, 94.3% and96.8%, respectively, for the said period.

CUSTOMERS

We have established a wide customer base comprising more than 400 customers as at 31December 2019. Our customers of property management services are mainly owners’corporations of both private residential estates and standalone residential buildings, Hong KongHousing Authority which owns Home Ownership Scheme Courts and Public Rental Housing, aswell as owners and management companies of car parks. The unit size of properties managed byour Group in Hong Kong typically ranges from approximately 1,500 sq.ft. to 3,700,000 sq.ft..


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The below table sets out the breakdown of revenue generated from the propertymanagement services by different types of customers under our property portfolio for the periodsindicated:


(unaudited)

Public sector– Housing Authority 47 0.0 – – 6,122 1.7 3,712 1.3 7,266 2.2– Others 1,329 0.4 1,174 0.3 837 0.2 617 0.2 3,229 1.0

1,376 0.4 1,174 0.3 6,959 1.9 4,329 1.5 10,495 3.2

Private sector– Owners’ corporations 341,336 93.5 339,955 92.7 335,169 90.4 252,541 90.3 273,173 84.1– Owners’ committees 9,231 2.5 13,222 3.6 13,782 3.7 14,061 5.0 16,579 5.1– Sole owners 9,897 2.7 9,743 2.7 11,849 3.2 6,225 2.2 22,368 6.9– Others 3,270 0.9 2,825 0.7 3,034 0.8 2,667 1.0 2,349 0.7

363,734 99.6 365,745 99.7 363,834 98.1 275,494 98.5 314,469 96.8

Total 365,110 100.0 366,919 100.0 370,793 100.0 279,823 100.0 324,964 100.0

Note: Others entities under the public sector comprise schools and under the private sector comprise the DMCmanagers.

The below table sets out the breakdown of revenue generated from the stand-alone securityservices contracts by different types of customers under our property portfolio for the periodsindicated:


(unaudited)

– Owners’ corporations 27,599 90.8 29,567 89.2 26,000 86.9 19,855 87.2 19,155 77.3– Owners’ committees 1,043 3.4 1,114 3.4 1,338 4.5 974 4.3 1,121 4.5– Sole owners 1,566 5.1 2,256 6.8 2,371 7.9 1,785 7.8 4,312 17.4– Others 196 0.7 223 0.6 224 0.7 167 0.7 188 0.8

Total 30,404 100.0 33,160 100.0 29,933 100.0 22,781 100.0 24,776 100.0

Note: Others comprise the DMC managers.


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Our five largest customers

For each of the year ended 31 March 2017, 2018 and 2019 and the nine months ended 31December 2019, our five largest customers accounted for approximately 15.6%, 14.3%, 13.0%and 12.1% of our total revenue, respectively, and each of which is accounted for less than 30%of our total revenue for the respective period.

The following set out the profile of our five largest customers during the Track RecordPeriod:

For the year ended 31 March 2017

RankName ofCustomer

Background ofCustomer

Service provided byour Group

Relationshipwith thecustomer

Transactionamount

% of ourtotal

revenue(HK$’000)

1. Customer A Owners’ corporation Property managementservices

Over 17 years 15,850 4.0

2. Customer B Owners’ corporation Property managementservices

Over 17 years 13,013 3.3

3. Customer G Owners’ corporation Stand-alone securityservices

Over 4 years 11,374 2.9

4. Customer C Owners’ corporation Property managementservices

Over 11 years 10,905 2.8

5. Customer D Owners’ corporation Property managementservices

Over 16 years 10,486 2.6

61,628 15.6


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RankName ofCustomer




Transactionamount

% of ourtotal

revenue(HK$’000)


Over 17 years 14,162 3.4

2. Customer E Owners’ corporation Property managementservices

Over 7 years 11,689 2.8


Over 11 years 11,529 2.8

4. Customer D Owners’ corporation Property managementservices

Over 16 years 11,352 2.8

5. Customer F Owners’ corporation Property managementservices

Over 16 years 10,133 2.5

58,865 14.3


RankName ofCustomer




Transactionamount

% of ourtotal

revenue(HK$’000)


Over 17 years 15,386 3.6


Over 11 years 12,008 2.8


Over 16 years 10,455 2.5


Over 4 years 9,393 2.2

5. Customer H Owners’ corporation Property managementservices


55,326 13.0


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For the nine months ended 31 December 2019

RankName ofCustomer




Transactionamount

% of ourtotal

revenue(HK$’000)


Over 17 years 11,940 3.3


Over 11 years 9,637 2.7


Over 16 years 8,304 2.3



5. Customer H Owners’ corporation Property managementservices


43,863 12.2

All of our five largest customers during the Track Record Period are Independent ThirdParties.

Salient contractual terms and conditions

As at 31 December 2019, we had more than 400 customers and we entered into eitherproperty management or stand-alone property security services contract with a majority of thesecustomers. Each service contract is negotiated independently with each individual customer andthe contractual terms may vary among different contracts. Salient contractual terms of themajority of our service contracts are summarised below:

Term of services: Generally ranges from one to three years. Some servicecontracts contain a renewal clause pursuant to which theservice contracts would be renewed under the same or betterterms

Services fees The agreements set out the property management fee amountwhich mainly comprises officers’ and security staff’s wagesand benefits and managers’ service fees and the alloweddisbursements (if any)


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Consent to subcontract: We may generally subcontract services in respect of repairand maintenance and cleaning by inviting written quotationsand adopting fair bidding with approval from our customers

Insurance: Subject to the service contracts with our customers, we andour customers shall jointly enter into insurance policies suchas property all risks and public liability as are necessary andour subcontractors (if any) will also be required to purchaseappropriate insurance


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Complaints: We shall attend to and handle any complaints received fromour customers or the tenants relating to the management ofthe properties

Accounts: We shall produce unaudited monthly accounts and assist theauditors in preparing the audited annual accounts

Budgeting: Some services contracts provide that we prepare budgets forthe following financial year, taking into account theprevailing laws

Employees allocated: We shall assign to the properties the number, grade and typeof staff as stipulated in the services contract

Minimum wagerequirement:

Should there be any change to the statutory minimum wage,(i) we shall renegotiate the services fee with our customerswith reference to the revised statutory minimum wage; or (ii)our customers shall pay for the additional salary and relevantstaff costs which fall short of the revised statutory minimumwage

Termination: Should we commit any breach or material breach, or fail toobserve or perform terms and conditions (as the case maybe), our customers may (i) terminate the services contractentirely; or (ii) serve a warning notice to us to demandrectification. If we fail to take steps to rectify or improve ourperformance within a reasonable time, our customers shall beentitled to terminate the service contracts

Either party may in general terminate the services contractby giving one to three months’ written notice

Expenses for insurance policies that were taken out in the joint names of the customers andus are fully borne by our customers. Generally, no credit term is provided in the servicescontracts. We usually issue monthly invoices to our customers with a breakdown of the fee andwithin a few weeks our accounts department will send a reminder for our customers to settle theservices fee. If the outstanding services fee is not settled in two months, our accountsdepartment will send a second reminder urging our customers to settle the outstanding amount.If the outstanding services fee is not settled in three months, we may send formal letters to ourcustomers demanding payment and consider taking legal action to recover the outstandingamount.


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Payment and pricing policy

Our revenue is mainly derived from the contractual service fees received from ourcustomers. The contractual service fees are different from the property management fees paid byresidents, which is the income of the respective owners’ corporations. While the contractualservice fees are paid directly by our customers to us, collection of property management fees ismostly performed by us on behalf of the owners’ corporations. Property management fees arenormally received by cash, cheque or autopay. Collected property management fees would bekept at owners’ corporations’ segregated account or the customer’s own bank account, subject toour customers’ preference.

Our service contracts are all fixed sum contracts. Under a fixed sum contract, all directstaff costs involved in the management of a property are borne by the property managementcompany, and the property management company is paid a fixed fee covering all relevant costssuch as direct staff, administrative overhead and the manager’s remuneration. The calculation ofthe fixed fee is based on several factors including the initial expected cost to the propertymanagement company when entering into the property management service contract.

In the negotiation of contract fees with customers, we would prepare an estimate of themonthly expenditure based on the service scope and staff deployment desired by the customer.Depending on the customers’ ability and willingness to accept higher service fees, we willpropose a service fee with increments in line with cost increases.

SEASONALITY

We have not experienced material seasonal fluctuations in our revenue given that most ofour revenue during the Track Record Period was derived from fixed term service contracts andwe provide monthly invoice to our customers for a relatively fixed amount.

MARKETING

Our business relies considerably on the continuity of existing contracts. We do not maintaina sizeable marketing team and do not organise regular advertising activities, as it is not ourstrategy to devote substantial resources in direct advertising campaigns. However, we havemanaged to build a portfolio of over 400 customers as at 31 December 2019. Our Directorsbelieve this is attributable to our marketing strategy that focuses more on building our reputationand customer service. Apart from management activities, our senior management staff are alsoresponsible for preserving good customer relationships in an attempt to promote ourselves in thecommunity through word of mouth.


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Since most of our new service contracts under the property management services areobtained through tenders in compliance with the Building Management Ordinance, allcompetitors are on the same open platform and are evaluated by qualifications, price andreputation. Our Directors believe that our success is directly attributable to our strong reputationin the community of which was established gradually by providing high quality services. OurDirectors believe that if our customers are satisfied with our services, they may recommend usto members of other owners’ corporations through their personal networks, thus increasing thechances of our success in future tenders of other properties.

Although we do not organise any direct advertising activities, we are active in taking partin social activities to gain public exposure and enhance public awareness. From time to time ourDirectors and members of the senior management would attend district community events, suchas festival functions, environmental protection promotion events, etc. where we can meet withmembers of owners’ corporations from different districts. Our Directors believe that these socialnetworking events provide a perfect platform for us to reach out to new potential customers. Wehave received numerous awards from various organisations and government departments in thepast, which is a sign of the quality of our service. For details of these awards, please refer to theparagraph headed “Qualifications, certifications and awards” in this section.

SUBCONTRACTING

We provide property management services including security, repair and maintenance andcleaning pursuant to the services contracts with customers. With the exception of cleaningservices, most of these services are provided by our own staff. We have our own security staff,however, our Group has subcontracted some of the security from our property managementcontracts to Independent Third Parties during the Track Record Period to complement the growthof our business when we do not have sufficient manpower to provide the security services. Wealso subcontract almost all of the cleaning services to third-party contractors on the grounds thatit is more cost effective and flexible.

We maintain an approved cleaning subcontractor list. The criteria of which we select oursubcontractors are, inter alia, (i) service quality; (ii) size and reputation of the subcontractors;(iii) possession of any ISO certification(s); (iv) price and payment terms; (v) availability ofdesired services and cleaning solutions; and (vi) experience. The approved cleaningsubcontractors differ in scale and service capability. Accordingly, the required level and scope ofservice depends on the demands of the customers and the sizes of their properties. Based on therequirements of customers, we will shortlist a suitable cleaning subcontractor and engage thesubcontractor by tender. Under certain property management contracts, consents from customersfor the choice of subcontractors are required.


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For cleaning services, the scope and level of services varies between properties, thusrequiring a separate subcontracting agreement for each property. The following are the salientterms of our typical subcontracting agreement:

Term No fixed term is specified in most of these agreements.However, most of these agreements can be terminated byeither party giving fourteen days’ written notice.

Payment terms The cleaning services charges are paid by us to thesubcontractors on a monthly basis. To the best knowledgeand belief of our Directors, it is an industry norm thatcleaning services charges are paid to property cleaningsubcontractors on a monthly basis and no further credit termis granted by property cleaning subcontractors in HongKong.

Obligations ofsubcontractors

The subcontractor is responsible for the relevant supplies,cleaning tools, equipment, cleaning staff’s salaries andinsurances.

Subcontracting fees Subcontracting fees are typically payable monthly,determined with reference to the number of units or size ofthe property involved.

Termination If the respective subcontractor fails to fulfil its obligations,after receiving two warnings, the agreement will beterminated with immediate effect without any compensation.

The agreement can be terminated by either party by givingfourteen days’ written notice.

Our five largest subcontractors

For each of the year ended 31 March 2017, 2018 and 2019 and the nine months ended 31December 2019, the subcontracting fees attributable to the largest subcontractor accounted forapproximately 34.9%, 39.2%, 40.4% and 25.9% of the total subcontracting costs, respectively,while the subcontracting fees attributable to the five largest subcontractors accounted forapproximately HK$13.0 million, HK$14.5 million, HK$15.2 million and HK$16.8 million,respectively, representing approximately 72.7%, 85.0%, 87.5% and 76.2% of the totalsubcontracting costs, respectively. Our Directors confirmed that, during the Track Record Periodand up to the Latest Practicable Date, none of our Directors, their close associates or, to theknowledge of our Directors, any Shareholder with over 5% of the number of the issued Sharesof our Company, had any interest in our five largest subcontractors.


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The following set out the profile of our five largest subcontractors during the Track RecordPeriod:


RankName ofSubcontractor

Background ofSubcontractor

Service providedto our Group

Relationshipwith thesubcontractor

Transactionamount

% of our totalsubcontracting

costs(HK$’000)

1. Subcontractor A Cleaning Cleaning services Over 14 years 6,240 34.9

2. Subcontractor B Cleaning Cleaning services Over 13 years 4,445 24.9

3. Subcontractor C Cleaning Cleaning services Over 18 years 1,237 6.9

4. Subcontractor D Cleaning Cleaning services Over 8 years 537 3.0

5. Subcontractor E Cleaning Cleaning services Over 6 years 528 3.0

12,987 72.7






Transactionamount


costs(HK$’000)



3. Subcontractor C Cleaning Cleaning services Over 18 years 1,346 7.9

4. Subcontractor F Cleaning Cleaning services Over 2 years 638 3.8


14,458 85.0


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Transactionamount


costs(HK$’000)



3. Subcontractor F Cleaning Cleaning services Over 2 years 995 5.7

4. Subcontractor C Cleaning Cleaning services Over 18 years 897 5.2


15,191 87.5

For the nine months ended 31 December 2019





Transactionamount


costs(HK$’000)


2. Subcontractor G Cleaning andsecurity

Cleaning andsecurity services

Since March 2019 4,552 20.6


4. Subcontractor I Security Security services Since November2018

1,168 5.3

5. Subcontractor J Cleaning Cleaning services Over 1 year 909 4.1

16,836 76.2

All of our five largest subcontractors during the Track Record Period are Independent ThirdParties.


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If an accident arises out of and in the course of the performance of the work covered by thesubcontract, the subcontractor would be directly liable to the injured third party claim. However,since K-King is the principal contracting party to most of our subcontracting agreements, it maybe also held liable for any damages awarded to the injured party. As our Group maintains ourown public liability insurance policy, our Directors are of the view that the coverage of the saidinsurance policy is sufficient and adequate to mitigate such potential risk. Please refer to theparagraph headed “Insurance” in this section for more details. During the Track Record Period,we did not record any material accident suffered by our subcontracting workers in performanceof their duties for us.


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SUPPLIER

During the Track Record Period, we had no major suppliers for goods. Our Directorsconfirmed that, during the Track Record Period and up to the Latest Practicable Date, none ofour Directors, their close associates or, to the knowledge of our Directors, any Shareholder withover 5% of the number of the issued Shares of our Company, had any interest in any of oursuppliers. Our suppliers are Independent Third Parties.

QUALITY CONTROL

We place great emphasis on the quality of services we provide; therefore, we haveestablished a system of quality control policies and procedures to guarantee the quality standardof our property management services. Our Directors believe that upkeep of the quality of ourservices is crucial in assuring the continued success of our business operation.

Quality control over our property management services

In addition to the daily duties of the on-site security guards, property officers are assignedto perform weekly site-inspections as a control measure to ensure that the management of theproperties complies with a standard checklist. The checklist includes (i) the performance of thesecurity staff; (ii) the condition of public areas; (iii) the status of collection of the monthlyproperty management fees; (iv) the progress and safety of repair work (if any); and (v) thehandling progress of any complaints. Responsible area managers overseeing the property officerswould also perform similar duties to verify the condition of the properties and follow-up onimportant issues. The performance of front-line staff is properly supervised when the propertymanagers act as the first point of contact for our customers. Serious and important issues arealso reported to our senior management for further follow up. This centralised reporting andquality control system is intended to ensure the standard of services.

Quality control over subcontractors

To ensure the quality of the services provided by our subcontractors, property managementteams are required to perform regular and ad-hoc inspections on the designated buildings.Regular inspections are carried out on a weekly basis during which the property managementteam will run through a standard checklist and evaluate the cleanliness of all concerned areaswithin the buildings. Any subpar situation will be recorded and reported to the managementdirectly during the daily morning briefings. The issues will be followed up by the propertymanagement teams with the involved subcontractors. Repeated failure to meet the expectedservice standard may lead to termination of contracts with the relevant subcontractors.


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Complaint management

Complaints received from residents are a leading indicator of poor property managementservices. Detailed complaint management procedures are established to handle all complaintmatters in a timely fashion and maintains our service standard at a high level.

If the customer has a complaint regarding any security or cleaning service, the head of thesecurity supervisor will be responsible for follow up. If the security supervisor is not able toresolve the complaint, the property officer will be notified. If we have received three complaintsor above in relation to a subcontractor from the same customer, we will assign a property officerto meet with the subcontractor to resolve the problem. These procedures would ensure that allcomplaints are handled and resolved in a timely manner in order to uphold the quality ofservice. Area managers would also follow up on the progress with the respectiveowners/residents if necessary. During the Track Record Period, we did not receive any materialcomplaint from the property residents.

Staff selection process

We pursue a selective approach aimed at building a team of quality staff who are capable ofperforming their respective duties diligently.

We set out specific requirements for each post to ensure that employees hired by us arequalified to perform their job function satisfactorily. The areas that may be taken intoconsideration include (i) education background; (ii) proof of specialty; (iii) membership ofprofessional entities; (iv) statutory registration related to the applied position; (v) workexperience; (vi) information of continuing education; and (vii) possession of statutory licence orpermit related to the applied position. Candidates of property managers or above are required tohave a minimum of five years of experience in property management, where membership of theHong Kong Institute of Housing or the Chartered Institute of Housing is considered anadvantage.

RENTAL SERVICES

As at the Latest Practicable Date, we had two properties in Hong Kong, details of whichare set out in the paragraph headed “Property” in this section. One of the properties is beingused by us as an storage and office premises. The other property is being leased out toIndependent Third Parties in return for rental payment on a monthly basis. For the details of ourinvestment property, please refer to the details of Property A as set out in the table under theparagraph headed “Property” in this section. We completed the acquisitions of Fortune Trend andMore Rise, our subsidiaries principally engaged in properties investment, on 31 March 2017,when we started our rental service. Property A was rented to tenants when our Group acquiredFortune Trend. During the Track Record Period, there were 28 tenants under 53 lease agreementswith terms of two years in general. Since we commenced our rental services and during theTrack Record Period, the occupancy rates of Property A were approximately 84.9%, 72.3%,90.8% and 99.7%, respectively, which is calculated with reference to the number of calendardays occupied by our tenants at Property A, divided by the number of calendar days during therelevant periods. As at the Latest Practicable Date, there were 14 tenants under 14 leaseagreements with an average remaining term of 12 months.


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For each of the year ended 31 March 2017, 2018 and 2019 and the nine months ended 31December 2019, from our investment property, we generated revenue of HK$nil, approximatelyHK$1.1 million, HK$1.4 million and HK$1.2 million, representing 0%, approximately 0.3%,0.3% and 0.3% of our total revenue, respectively. To the best knowledge of our Directors, thetenants (including their ultimate beneficial owner(s), directors and senior management) of ourrental services are not connected persons of or had/have any relationship with our Company, oursubsidiaries, our Controlling Shareholders, Directors, senior management or any of theirrespective associates, whether past or present.

MONEY LENDING BUSINESS

To diversify our business, we began our money lending business under our money lenderslicence in June 2017 by providing loans to our customers. As confirmed by our Directors, wedeveloped and sourced our money lending customer base by exploring our existing businessacquaintances and networks to locate potential corporate and individual customers in HongKong. Since we have not advertised our money lending business to the open market and in viewof the customer base was in the progress of development, only five loans were granted duringthe Track Record Period.

During the Track Record Period, we had granted a total of five loans, all of which weremade to Independent Third Parties. Four of these five loans were classified as discloseabletransactions under Chapter 19 of the GEM Listing Rules, details of which were disclosed in ourCompany’s announcements dated 17 July 2017, 15 August 2017, 27 March 2019 and 5 May2020; while the other one was not required to be disclosed according to the GEM Listing Rulesdue to the small transaction amount. The average loan size of these five loans is HK$10.3milllion. The following table sets out the details of these five loans:

Date ofthe loanagreement Principal amount Interest rate Term Loan type Collateral (note 1) Customer type

Loan 1 17 July2017

HK$16 million 14% per annum Six months commencing fromthe date of the loanagreement

Secured loan (a) two post-dated chequesfrom the borrower for therespective amounts of theinterest accrued on theloan payable after the dateof drawdown and apost-dated cheque for thepayment of the principalamount of the loan on thedate of repayment;

(b) a guarantee executed by aguarantor (note 2)

Corporate


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Date ofthe loanagreement Principal amount Interest rate Term Loan type Collateral (note 1) Customer type

Loan 2 18 July2017

HK$7 million 12% per annum (or at suchrate as may from time totime determined by thelender)

Six months commencing fromthe date of the loanagreement or at such termas may from time to timeextended or determined bythe lender

Unsecured loan – Individual

Loan 3 15 August2017

HK$7 million 12% per annum Six months commencing fromthe date of the loanagreement

Secured loan One post-dated cheque fromthe borrower for the interestaccrued on the loan payableon the date of maturity andone post-dated cheque forthe payment of the principalamount of the loan on thedate of maturity

Individual

Loan 4 15December2017

HK$3.5 million 14% per annum Nine months from drawdowndate of 27 December 2017

Secured loan One post-dated cheque fromthe borrower for the interestaccrued on the loan payableon the date of maturity andone post-dated cheque forthe payment of the principalamount of the loan on thedate of maturity

Individual

Loan 5 27 March2019

HK$18 million 5% per annum (note 3) One year commencing fromthe date of the loanagreement (note 4)

Secured loan Second mortgage of aproperty created by theborrower in favor of thelender

Individual

Notes:

1. As advised by Frost & Sullivan, it is common to use post-dated cheques as a form of security in moneylending industry, which is subject to the agreement between the money lending company and borrower.Our Directors believe that these are effective means to enable our Group to recover our losses in the eventof default given that the amount of the cheque included both the interests accrued and the principalamount.

2. To the best knowledge of our Directors, the ultimate beneficial owner of both the borrower and theguarantor for Loan 1 is the same individual and an Independent Third Party. Save as disclosed, thereare/were no other relationship between the borrower, the guarantor and our Group, their subsidiaries,controlling shareholders, directors, senior management or any of their respective associates, whether pastor present. Our Directors believe that the guarantor of Loan 1 possess a good credit standing and our


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Group’s internal control measures on credit risk management is effective. Nevertheless, our Group hasenhanced our internal control and reinforce the execution of existing measures in the review of the creditstanding of guarantor.

3. The interest rate of Loan 5 is lower than other loans granted by our Group because we have taken intoaccount the second mortgage created as collateral.

4. On 5 May 2020, our Group entered into a loan agreement with the borrower of Loan 5 to extend the termof the loan until the maturity date of 26 March 2021, the conditions of which remain the same.

The following table sets out the movement and analysis of the loans under our moneylending business for the dates indicated:

FY2017 FY2018 FY2019 9M2020

From1 January

2020 up tothe Latest

PracticableDate

Beginning of year/period:– number of loans – – 1 1 1– amount of loans (HK$’000) – – 3,500 18,000 18,000– interest balance (HK$’000) – – 128 12 690

Addition:– number of loans granted – 4 1 – –– amount of loans granted

(HK$’000) – 33,500 18,000 – –– interest balance (HK$’000) – 1,593 287 678 210

Less:– number of loans repaid – 3 1 – –– amount of loans repaid

(HK$’000) – 30,000 3,500 – –– interest balance (HK$’000) – 1,465 403 – –

End of year/period:– number of loans – 1 1 1 1– amount of loans (HK$’000) – 3,500 18,000 18,000 18,000– interest balance (HK$’000) – 128 12 690 900

To the best knowledge of our Directors, the borrowers of our money lending business(including their ultimate beneficial owner(s), directors and senior management) did not or do nothave any relationship (business, financing or otherwise) with our Company, our subsidiaries, ourControlling Shareholders, Directors, senior management or any of their respective associates,whether past or present.


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For each of the year ended 31 March 2017, 2018 and 2019 and the nine months ended 31December 2019, the turnover contributed by the interests income under our money lendingbusiness amounted to approximately HK$nil, approximately HK$1.6 million, HK$0.2 millionand HK$0.7 million, representing 0%, approximately 0.4%, 0.1% and 0.2% of our total revenue,respectively.

During the Track Record Period and up to the Latest Practicable Date, we had obtained allmaterial licences, permits and certificates necessary for Lucky Stone Finance to conduct itsoperations and money lending business in Hong Kong from the relevant governmental bodies inHong Kong.

Loan approval

After receiving the applicant’s application and the requested amount of the loan, we willobtain a proof of identity, background and contact details. Our credit officer will also enquirewhether the applicant is a connected person of our Company. If there is/are a guarantor(s) forsecured loans, we will also obtain a proof of identity, background and contact details and creditworthiness of the guarantor. For the loan application with guarantor, our credit officer will alsoenquire whether the guarantor(s) is/are a connected person(s) of our Company. All loans belowHK$5.0 million will be approved by the chairman of the credit committee and one other memberof the credit committee, loans below HK$10.0 million will be approved by all members of thecredit committee and any other loan amount will require approval from our Board.

The powers of the credit committee include (i) approving credit policy; (ii) monitoringmarket changes and updating policies; (iii) monitoring loan quality; (iv) providing advice to thecredit officer; and (v) approving the loan amount in excess of the credit officer’s authorisedapproval amount. After the loan application is approved, we will enter into a loan agreementwith the applicant. We shall also prepare a repayment schedule and a cheque/ telegraphictransfer to the applicant in accordance with the drawdown notice signed by the applicant.

Our credit committee comprises of two of our executive Directors, Mr. Lee Chin Ching,Cyrix (chairman) and Mr. Eric Todd, and one of our independent non-executive Directors, Mr.Lam Kai Yeung.


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Loan monitoring

After granting of the loan, details of our loan agreements are recorded in our loanmanagement system which records the repayment schedules of each loan granted. Our Group hascredit check procedures in place to verify the identity and the credit worthiness of everycustomer and guarantor (if applicable), as well as to avoid money laundering.

Loan collection process

We have not engaged any collection agents for the purpose of collecting overdue loansfrom customers in the past. In the event of default in the repayment of loans, we will initiallyprovide verbal reminders by telephone to the customer. If the overdue amount remains unsettledafter verbal reminders, we will issue written reminders and notices to the customer andguarantor (if applicable). Where the amount is overdue and we are unable to contact thecustomer and guarantor (if applicable), we may consider taking legal action against the customerand guarantor (if applicable), for the overdue loan, and where applicable, enforce any securityby obtaining a court order. As at the Latest Practicable Date, our Directors confirm that we hadnot experienced any loan default incident.

To strengthen the regulation of money lending-related malpractices, additional licensingconditions have been imposed on the licensees by the Licensing Court with effect from 1December 2016 and 11 October 2018, respectively. In response to those licensing conditions, thechairman of our credit committee and our executive Director, Mr. Lee Chin Ching, Cyrix, alongwith the other members of our credit committee have taken measures to ensure compliance withsuch conditions, including undertaking due diligence checks with intending borrowers in relationto intermediaries, ensuring protection to personal data, explaining to borrowers terms ofrepayment and possible consequences for default and ensuring compliance with relevantguidelines in relation to anti-money laundering and counter-terrorist financing. For details ofsuch additional licensing conditions, please refer to the section headed “Regulatory overview –III. The Hong Kong laws in relation to money lending business” in this [REDACTED]document.


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EMPLOYEES

As at 31 December 2019, we had a total of 1,423 full-time employees. A breakdown by jobfunction and geographical locations is set forth below:

As at 31 December 2019Hong Kong PRC Total

Job functionManagement 18 7 25Property management 123 73 196Accounting and administration 139 18 157Security 998 7 1,005Repair and maintenance and cleaning 19 21 40

1,297 126 1,423

As at the Latest Practicable Date, we had 1,741 employees. Since property management ispart of our core business and we outsource most of our cleaning work to subcontractors, ouremployees comprise mainly of security staff who are positioned at their assigned properties,accounting for around 70% of our total number of employees. Administrative staff are mainlystationed at the headquarters to offer central support. We hired 10 staff who are members of atleast one of the following professional bodies: (i) The Hong Kong Institute of Housing; (ii)Chartered Institute of Housing; and (iii) Registered Professional Housing Manager as at theLatest Practicable Date.


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Pursuant to the Security and Guarding Services Ordinance, all of our employees whoprovide security work for customers are required to hold a valid security personnel permit. As atthe Latest Practicable Date, all of our security employees possess either category A or categoryB of the security personnel permit. We maintain a control system to monitor and update thepermit status of all of our security staff. Two months before the expiry of the existing securitypersonnel permit, reports are generated from our computer system and we will remind securitystaff to renew his/her security personnel permit. In compliance with the relevant regulations, nosecurity staff without a valid security personnel permit is allowed to provide security services.

Pursuant to the Electricity Ordinance, all of our electrical technicians who provideelectrical maintenance work to our customers are required to be registered electrical workers. Wemaintain a control system to monitor and update the registration status of all of our electricaltechnicians. Two months before the expiry of the existing registration, we will remind the staffto renew his/her registration. No electrical technician without a valid electrical workerregistration is allowed to provide electrical maintenance service.

Although not a statutory requirement, many of our customers require their propertymanagers to have certain number of management staff or on-site security managers possessingcertain of the following professional qualifications, such as (i) membership of The Hong KongInstitute of Housing; (ii) membership of Chartered Institute of Housing; and (iii) RegisteredProfessional Housing Manager. As at the Latest Practicable Date, 10 members of our staffpossessed at least one of the above professional qualifications.

Our Directors consider our employees an important asset of our Group. New employees arerequired to undergo induction training to familiarise themselves with our rules and regulationsand the requirements of their job.

We also emphasise the continuing education and training of our staff. In-house trainingsessions are held by our senior management to reinforce and update our employees’ knowledgeon government regulations and our requirements. Upon any complaint received that is directed toparticular employees, extra training will be arranged where applicable to improve the quality ofwork produced by the concerned employees to achieve a mutual benefit for both ourselves andour employees.

Our remuneration package to our employees includes salary, discretionary bonuses andallowances. In general, we determine employee salaries based on their individual qualifications,position and seniority. We have designed an annual review system to assess the performance ofour employees, which forms the basis of our decisions around compensation and promotions.


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ENVIRONMENTAL PROTECTION

Our business is subject to certain laws and regulations in relation to environmentalprotection. Please refer to the section headed “Regulatory overview” in this [REDACTED]document which sets out further information about such laws and regulations. Our Directorsbelieve that it is essential for us to be environmentally responsible and to meet our customers’demands for environmental protection and at the same time meeting the community’s expectationfor a healthy living and working environment. To this end, we have set up an environmentalmanagement system, which was accredited with ISO 14001:2015 certification, to promoteenvironmental awareness and to prevent pollution of the environment resulting from our works.

During the Track Record Period, we did not incur any material expenses in relation toenvironmental protection. During the Track Record Period and up to the Latest Practicable Date,our Group had no material non-compliance or violations on any laws and regulations in relationto environmental protection. During the Track Record Period and up to the Latest PracticableDate, we had not been prosecuted under the relevant applicable environmental laws andregulations.

WORK SAFETY

We emphasise the health and safety of our employees, and we are committed to providing asafe and healthy working environment for the benefit of our staff. We have adopted a safetymanual to promote occupational health and safety at work and to ensure compliance with theapplicable laws and regulations in Hong Kong. We have also set up an occupational health andsafety management system to promote safe working practices among all employees and toprevent the occurrence of accidents. As a result, our occupational health and safety managementsystem has been certified with OHSAS 18001:2007. In addition, our Group holds varioustraining sessions in relation to work safety to ensure that our employees are kept up to date andreminded of the current rules and regulations.

In view of the outbreak of COVID-19, we have adopted a contingency plan whereby ourstaff and subcontractors shall take all practicable steps in properties under our management tomaintain a hygienic environment in the interest of all personnel who may be present such asproperty owners, occupants, visitors and our staff and subcontractors, which includes thefollowing measures:

• regular hand sanitising

• regular disinfection of common areas

• the request to wear surgical face masks

Accordingly, all employees and our subcontractors are required to familiarise themselveswith requirements of our contingency plan for pandemic outbreak and ensure that the measuresare properly implemented.


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Our Directors confirm that, during the Track Record Period and up to the Latest PracticableDate, no relevant authority has imposed any condition or specific safety requirements on us dueto breaches of the health and safety laws, rules or regulations in Hong Kong.


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PROPERTY

As at the Latest Practicable Date, we owned two properties. The details of our ownedproperties are as follows:

Address Registered owner Usage

Approximatesaleable area

(sq.ft.)

Property A Workshop A1 on 1stFloor, Hang FungIndustrial BuildingPhase 1, Nos. 2G HokYuen Street,Kowloon

Fortune TrendInvestment Limited

Storage andoffice

6,200

Property B Factory Unit A on 13thFloor, Tak WingIndustrial Building,No.3 Tsun Wen Road,Tuen Mun, NewTerritories, Hong Kong

More Rise InvestmentLimited

Storage andoffice

2,600

Pursuant to Rule 5.01B(2)(a) of the Listing Rules, a [REDACTED] document must includevaluations of and information on property interests (as defined in Rule 5.01(3) of the ListingRules): (1) that form part of its property activities except for those with a carrying amount (asdefined in Rule 5.01(1) of the Listing Rules) below 1% of its total assets (as defined in Rule5.01(4) of the Listing Rules). The total carrying amount of property interests not valued mustnot exceed 10% of its total assets; and (2) that do not form part of its property activities if thecarrying amount of a property interest is or is above 15% of its total assets. Property A is ourGroup’s investment property. We are therefore required under Rule 5.01A(1) of the Listing Rulesto include in this [REDACTED] document a valuation report of Property A. The full text of theletter, summary of values and valuation certificate with regard to the property interests of ourGroup are set out in the section headed “Property valuation report” in Appendix IV to this[REDACTED] document.


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As at the Latest Practicable Date, we had the following material leased property:

Address Usage Tenants Landlords TermApproximatesaleable area

(sq.ft)

Unit L, 1/F., KaiserEstate Phase 2, No. 51Man Yu Street, HungHom, Kln, HK

Industrial (note) KSU JetfullInternationalInvestmentLimited

From 1st February 2019to 31st January 2022(both days inclusive)

8,100

Note: As confirmed by our Directors, the actual use is for storage and office purposes.


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INTELLECTUAL PROPERTY RIGHTS

For the information on intellectual property rights which are material to our business,please refer to the section headed “Further information about the business – Intellectual propertyrights of our Group” in Appendix VI to this [REDACTED] document.

Save for the trademarks and domain names disclosed in this [REDACTED] document, ourbusiness and profitability are not materially dependent on any trademark, patent, domain nameor other intellectual property.

As at the Latest Practicable Date, we were not aware of any infringement (a) by us of anyintellectual property rights owned by any third parties; or (b) by any third party of anyintellectual property rights owned by us. During the Track Record Period, there had not been anypending or threatened claim made against us, nor have there been any claim made by us againstthird parties, with respect to the infringement of intellectual property rights owned by us or thirdparties.

INSURANCE

To mitigate our property management risks, we maintain a range of insurance policies thatare vital to our operations including (i) civil liability professional indemnity – covering theliability for any loss or damage suffered by our customers in respect of any effects of thenegligent acts or omissions of KSU and Q&V, our employees and the third party subcontractorsacting on our behalf; the limit of indemnity is HK$50 million for any one claim and in total forany one period of insurance; (ii) public liability – covering the liability in respect of any bodilyinjury or property damage claim arising from or related to the provision of services and causedby our negligent acts or omissions or our employees; the limit of indemnity is HK$10 millionfor any one claim and an unlimited amount for any one period of insurance; (iii) employees’compensation – covering the liability to make any payment in respect of the death or bodilyinjury by accident of our employees under relevant employment laws in Hong Kong; the limit ofindemnity is HK$200 million for any one claim; and (iv) money-in-transit (if required) –protecting us and our customers against loss of money as a result of burglary or robbery – thispolicy is jointly taken out by us and some of our customers upon request and the limit ofindemnity is determined on a case-by-case basis pursuant to negotiations with our customers.Some of our customers require us to enter into the aforementioned insurance policies either inour own name or in joint names as required. We also ensure that our subcontractors arrange andmaintain the required insurance in respect of liability towards our customers that may arise fromthe performance of services as defined in the services contract.

Having regard to the current operations of our Group and the prevailing industry practicefrom the knowledge of our Directors, our Directors are of the view that the level of insurancecoverage maintained by our Group is in line with industry standards and is sufficient andadequate for our current business operations.


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Save as disclosed in the paragraph headed “Litigation and compliance” in this section,which may result in a material insurance claim, during the Track Record Period and up to theLatest Practicable Date, we had not made, nor been the subject of, any material insurance claim.

COMPETITION

According to the F&S Report, the property management market in Hong Kong isfragmented. According to Census and Statistics Department of Hong Kong, there were 2,040establishments engaged in the real estate maintenance management sector in 2018 with amajority of them being small-scale participants. In 2018, the aggregate market share of the top10 property management service providers was approximately 11.9% in terms of revenue, whichaccounted for a market revenue of approximately HK$7,826.6 million. Our Group ranked ninthin the property management market in terms of revenue with a market share of approximately0.6% in 2018. We believe that the principal competitive factors include, among others, servicelevel and coverage, reputation and financial resources.

For more details about the industry and markets that we operate in, please refer to thesection headed “Industry overview” in this [REDACTED] document.

LITIGATION AND COMPLIANCE

In carrying out our ordinary course of business, our Group is subject to the risk of beingsued or named as a defendant in legal actions, claims and disputes. The nature of the legalproceedings initiated against our Group generally include (i) claims for employees’compensation by our Group’s employees; (ii) claims for personal injuries; and (iii) claims forproperty damage or economic loss.

During the Track Record Period and as at the Latest Practicable Date, our Group has beeninvolved in one ongoing material litigation, which family members of the deceased commenceda legal action in the District Court of Hong Kong against KSU, for the personal injury causingdeath by accident arising out of and in the course of employment. The sudden loss of balanceand the fall onto the ground of the deceased, being the accident, was alleged by the applicant tobe caused by the accidental stepping of the deceased onto a pool of watery substance on thefloor in a building where the deceased was carrying our routine patrol duty as a security guard.

Our insurer has taken over the conduct of the litigation proceedings which are on-going.The amount of claim is to be assessed by court. As at the Latest Practicable Date, our Directorsare unaware of any potential penalty and a hearing concerning the ongoing material litigationwas fixed on 12 June 2020. Our Directors are of the view that the results of this case will nothave a material effect on our operations as our Directors expect that such claim by the applicantis to be fully covered by our insurance for up to the limit of HK$200 million for any one claim.


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Save as disclosed above, during the Track Record Period and up to the Latest PracticableDate, no member of our Group was involved in any litigation, arbitration or claim of materialimportance and, so far as our Directors are aware, no litigation, arbitration or claim of materialimportance is pending or threatened against any member of our Group as at the LatestPracticable Date.


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Our Group maintains a range of insurance policies in its own name to protect our Groupagainst legal or other business risks. In particular, our Group maintains our own public liabilityinsurance policy and employees’ compensation policy. Our Directors believe that any materialclaims concerning personal injuries sustained by the employees or third-party claimants shouldbe adequately covered by the insurance maintained by our Group.

For each of the year ended 31 March 2017, 2018 and 2019 and the nine months ended 31December 2019, our Group did not make any payment of material amount in relation tolitigations or employee claims. For each of the year ended 31 March 2017, 2018 and 2019 andthe nine months ended 31 December 2019, our Group was not required to make any provision inits financial statements for litigations and various claims because our Directors considered thatall material litigation cases and claims could be adequately covered by our insurance.

During the Track Record Period and up to the Latest Practicable Date, as confirmed by ourDirectors, we have complied with the Money Lenders Ordinance, Security and GuardingServices Ordinance and Property Management Services Ordinance, being the principal laws towhich our business operations in Hong Kong are subject, in all material respects.

As advised by our PRC Legal Advisers, during the Track Record Period and up to theLatest Practicable Date, we have complied with all the applicable laws and regulations inconnection with our business operations in the PRC in all material respects.

INTERNAL CONTROL AND RISK MANAGEMENT

Cash Management

Cash payments and receipts are commonly seen in the daily operation of the propertymanagement business. We maintain a set of internal control procedures to regulate the handlingof cash and checking of book balances under different circumstances.

Payment by Cash

For payments with an amount below HK$1,000 or if it is related to daily operations, suchexpenditure will be reviewed by our senior accounting manager. We maintain a petty cash levelof around HK$60,000 to facilitate payment for miscellaneous items. Accounting staff areresponsible for keeping the petty cash in a safe in the accounts department and the key to thesafe is kept by the accounting supervisor.

The accounts department updates expenditures in the petty cash book according to relevantinvoices and receipts. The level of petty cash is reviewed quarterly by the accounts department.Accounting supervisors and assistant accounting mangers conduct cross-approval to confirm thebalance of the petty cash. When the petty cash reserve is less than HK$1,000, the accountingsupervisor will replenish the reserve by depositing money into the fund after approval by Mr. HoYing Choi.


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Autopay

The administration department is responsible for checking the staff’s attendance recordbefore the month end salary payment. The senior accounting manager will cross-check thecalculation and then raise a request in the online system, subject to our Directors’ approval for amoney transfer.

Cheque management

An authorised signature of the senior accounting manager is required to acknowledge thereceipt of a new cheque book issued by our bank, after which the blank cheque book will be safekept by the accounting officer. Accounting staff will register the cheque numbers in the chequerecord book, which is kept and updated by the senior accounting manager. Whenever chequepayments are required for our business operation, accounting staff have to submit an applicationto the accounting officer for the use of blank cheques, and details of each cheque payment arerecorded in the cheque record book.

All cheques for payment should be issued in sequential order in the cheque record book.The bank-in of all issued cheques should be closely monitored and verified against bankstatements on a regular basis. The loss of any signed cheques after delivery to the relevant partymust be reported to the bank immediately to stop payment. The cancellation of cheques will beconfirmed by the accounts department and subsequently recorded on the check book stub.

Bank Reconciliation

The accounting officer is responsible for cross-checking our book with the bank statementat the end of the month. Uncleared cheques and pending fund transfers should be recorded in thebank reconciliation statement to ensure a complete record of all bank transactions. Accountingstaff will trace the reason for any discrepancies or missing records.

Monthly collection of management fee

We adopt an internal guideline on the collection of property management fees. Under theguideline, only designated on-site security staff is permitted to collect management fees fromproperty owners or tenants, while patrolling property officers are responsible for the deposit ofreceived cash and cheques. Pre-printed packages of management fee receipts with unique andtraceable serial numbers are sent to the security staff monthly. There are three copies for eachreceipt which are to be kept by different parties after the management fee is received by thesecurity staff. The receipt of fees by cash or cheque is subsequently logged in a record book,and the three copies of receipts are kept by (i) the payee to serve as acknowledgement; (ii) theaccounts department for deposit of management fees and record; and (iii) the customer forrecord.


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To reduce the risk of loss of collected fees, the patrolling property officer signs off therecord and collects the received cash and receipts from the security staff on a weekly basis. Thepatrolling property officer then delivers the deposit slips and receipts to the accountsdepartment, after which the security staff verifies by telephone to the accounts department theamount to be delivered. The accounting staff reminds the responsible security staff weekly topass the cash to the patrolling property management staff for delivery in a timely manner. Theseprocedures apply to customers with their own bank accounts and with bank accounts held ontrust by us.

The management fees received by us is logged into the internal system by our accountingstaff to compare and analyse, if applicable, the receipt of management fees with that of theprevious month. Cross-checking between (i) receipts and bank statements; and (ii) remainingpre-printed receipts; and (iii) outstanding management fees are conducted by our accountingclerks to ensure there is no fraud or unintended loss during the course of collection, safekeepingor delivery. The cross-checking is performed by our accounting clerks and reviewed by one ofour accounting supervisors. A list of residents with outstanding management fees will be draftedaccordingly and a payment table will be posted in the lobby of the building as a reminder.Overdue payments are then followed up by issuing letters of notification or filing for courtproceedings if payments continue to be overdue.

A more computerised process is adopted for some estate-type properties. On-site accountingstaff are responsible for collecting management fees and logging the receipt in the record book.Receipts are generated by the computer system for the payees’ record and the collected fees arebanked-in by the accounting staff on a daily basis. After the log-out time of the computer systemeach day, the on-site manager will perform an end-of-day reconciliation of the record bookagainst the collection report generated by the computer system and the bank deposit receipts.

QUALIFICATIONS, CERTIFICATIONS AND AWARDS

Qualifications

In order to provide property management, security services and offer particularmanagement solutions, a property management or security company must obtain certainlicence(s) under the laws of Hong Kong or necessary membership. Details of the above are setforth under the section headed “Regulatory overview” in this [REDACTED] document. Thefollowing table sets out the qualifications and licences held by us as at the Latest PracticableDate:


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Relevant Hong Konggovernment departments orstatutory bodies Description Qualification Holder

Current period ofvalidity

Security and Guarding ServicesIndustry Authority

Security CompanyLicence

To operate as asecurity companyfor supplyingindividuals toperform securitywork type 1

KSU 15 August 2017– 14 August 2022




Q&V 15 August 2015– 14 August 2020




Yorkshire 27 December 2017– 26 December2022

Housing Authority Housing AuthorityList of PropertyServices Agents

Property ServicesAgent (GroupPS1)

KSU N/A (Note)

Housing Authority Housing AuthorityList of SecurityServiceContractors

Security ServiceContractor (BandIIA)

Q&V N/A (Note)

Home Affairs Department BuildingManagementAgent pursuant tosection 40B to40D of theBuildingManagementOrdinance(Chapter 344 ofthe laws of HongKong)

BuildingManagementAgent

KSU N/A


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Relevant Hong Konggovernment departments orstatutory bodies Description Qualification Holder


Licensing Court Pursuant to theMoney LendersOrdinance forcarrying onmoney lendingbusiness in HongKong

To carry onbusiness as amoney lender

LuckyStoneFinance

15 June 2019 –16 June 2020

Note: Although annual renewal is required, the validity period is not stated. Our Group receives a letter annuallyfrom the Housing Authority for request of payment for the annual renewal fee to retain our name on therespective lists.

Certifications

The below table sets out our major certifications:

Nature Certification

Awardingorganisation orauthority Recipient


Quality Management System ISO 9001: 2015 A-ProfessionalCertificationServices Ltd.

KSU 6 July 2019 –14 July 2022

Occupational, Health and SafetyAssessment Series

OHSAS 18001:2007 A-ProfessionalCertificationServices Ltd.

KSU 6 July 2019 –12 March 2021

Environmental ManagementSystem

ISO 14001:2015 A-ProfessionalCertificationServices Ltd.

KSU 6 July 2019 –14 July 2022

Membership of professional body Membership The Hong KongAssociation ofPropertyManagementCompaniesLimited

KSU Since 7 October1997


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Awards

The below table sets out our major awards and recognition obtained in recent years:

Year(s) of award Recipient AwardAwarding organisation orauthority

2011–2019 KSU Caring Company The Hong Kong Council ofSocial Service

2017 KSU Outstanding Social CaringOrganization award

Social Enterprise ResearchInstitute

2016 KSU Hong Kong SecurityCompany Staff TrainingAward* (全港保安公司員工培訓大獎)

Hong Kong Institute ofRegistered SecurityTrainers

RESEARCH AND DEVELOPMENT

During the Track Record Period and as at the Latest Practicable Date, we did not engage inany research and development activity.


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HK$’000 % HK$’000 % HK$’000 % HK$’000 % …...Tender success rate 19.1% 53.8% 15.4% 84.6%...

Documents

Transcript of HK$’000 % HK$’000 % HK$’000 % HK$’000 % …...Tender success rate 19.1% 53.8% 15.4% 84.6%...