Share Offering of 125,000,000 Offer Shares to Raise Gross Proceeds of Up to HK$162.5 Million at Offer Price Ranging from HK$1.00 to HK$1.30 per Share

HONG KONG SAR - Media OutReach Newswire - 28 December 2023 - WellCell Holdings Co., Limited ("WellCell" or the "Company"; together with its subsidiaries, the "Group", stock code: 2477), a comprehensive telecommunication network support and ICT integration service provider and software developer in the PRC, announces today the details of the share offering (the "Share Offering") of its shares (the "Shares") and its proposed listing on the Main Board of The Stock Exchange of Hong Kong Limited (the "Stock Exchange of Hong Kong").

A total of 125,000,000 Shares (subject to the Over-allotment Option) (the "Offer Shares") are being offered or sold under the Share Offering, comprising placing (the "Placing") of 112,500,000 Shares (subject to reallocation and the Over-allotment Option) and a public offering of 12,500,000 Shares (subject to reallocation) (the "Public Offering"), representing 90% and 10%, respectively, of the total number of the Offer Shares. The offer price (the "Offer Price") is expected to be not less than HK$1.00 per Offer Share and not more than HK$1.30 per Offer Share. The Over-allotment Option allows the issuance of up to 18,750,000 additional Offer Shares, representing 15% of the Offer Shares.

Halcyon Capital Limited and Eddid Capital Limited, member of Eddid Financial Group, are the Joint Sponsors. As a member of Eddid Financial Group, Eddid Securities and Futures Limited is the Sole Overall Coordinator, Joint Global Coordinator, Joint Bookrunner and Joint Lead Manager. Halcyon Securities Limited, China Everbright Securities (HK) Limited, Beta International Securities Limited, CMBC Securities Company Limited, China PA Securities (Hong Kong) Company Limited and Quam Securities Limited are the Joint Global Coordinators, Joint Bookrunners and Joint Lead Managers. Maxa Capital Limited, SBI China Capital Financial Services Limited, SPDB International Capital Limited, Innovax Securities Limited, Cinda International Capital Limited, Patrons Securities Limited, ZMF Asset Management Limited and Goldlink Securities Limited are the Joint Lead Managers.

The net proceeds from the Global Offering are estimated to be approximately HK$81.6 million after deduction of underwriting fees and commissions and other estimated expenses in connection with the Global Offering, assuming an Offer Price of HK$1.15 per Offer Share, being the mid-point of the Offer Price range, and assuming the Over-allotment Option is not exercised. The Group intends to use the net proceeds for the following purposes:

• Approximately 28.0% or HK$22.9 million, will be used for financing the initial funding needs for its future ICT integration projects;
• Approximately 25.7% or HK$21.0 million, will be used for pursuing new research and development undertakings including:
  1. approximately HK$12.2 million, will be used for undertaking 5G industry application research and development projects;
  2. approximately HK$5.3 million, will be used for developing a telecommunication network enhancement services software based on end-user data;
  3. approximately HK$3.5 million, will be used for developing an easy-to-use wireless telecommunication network testing software;
• Approximately 14.7% or HK$12.0 million, will be used for expanding itsr manpower in project management to cater for the anticipated expansion plans and business growth;
• Approximately 4.0% or HK$3.3 million, will be used for financing its sales and marketing funding needs for expansion of manpower and marketing activities;
• Approximately 17.6% or HK$14.3 million, will be used for repaying part of its bank borrowings; and
• Approximately 10.0% or HK$8.1 million, will be used for its general working capital purposes.

A comprehensive telecommunication network support and ICT integration service provider in the PRC

Since starting business in 2003, WellCell is a comprehensive telecommunication network support and ICT integration service provider in the PRC that offers a comprehensive range of services and products, from enhancement and maintenance of the existing telecommunication networks of its customers and infrastructure, to customise computer system design for providing business-specific system to its customers. The Group also engages in research and development of software which complements its core services. According to the CIC Report, only few market players in the PRC have a similarly wide range of services as those that WellCell offers. The Group considers its extensive service coverage to be a competitive strength since it allows the Group to cross-sell its different types of services and products to its customers.

Over the years, the Group has obtained qualifications and accreditations that are material to its business operations from notable institutions in the telecommunication and related industries in the PRC, which include, among others, Construction Enterprise Qualification Certificate* (建築業企業資質證書) (General Contractor for Telecommunication Engineering Construction Level 3* (通信工程施工總承包三級)), Work Safety Permit* (安全生產許可證), Construction Enterprise Qualification Certificate* (建築業企業資質證書) (Professional Contractor for Electronic and Intelligent Engineering Level 2, Professional Contractor for Steel Structure Engineering Level 3, Construction labour* (電子與智能化工程專業承包二級、鋼結構工程專業承包三級、施工勞務不分等級)), Permit for Installation (Repair, Trial) of Electric Power Facilities* (承裝（修、試 ）電力設施許可證) (Installation Level 4, Repair Level 4, Trial Level 4* (承裝類四級、承修類四級、承試類四級)), Guangdong Province Safety Technology Preventive System Design, Construction and Maintenance Qualification Certificate* (廣東省安全技術防範系統設計、施工、維修資格證), CMMI Maturity Level 3 certification, the recognition of Guangdong Telecommunication Network Application and Testing Enhancement Engineering Technology Research Center 2021* (2021年度廣東省通信網路應用及檢測優化工程技術研究中心認證), and a series of ISO management certifications. The management believes that these qualifications and accreditation serve as proof of recognition the Group received from the relevant authorities and other industry organisations in the PRC, and as the credentials evidencing its industry competence.

Established and maintained solid relationships with its customers (including some renowned state-owned, listed and private enterprises)

The Group's experience and knowledge accumulated in the provision of telecommunication network support services and ICT integration services in the PRC, its dedication to understand its customers' needs and demands, and its ability to respond to its customers' requests, have collectively fostered its customers' confidence in the quality of the Group's services and products. As such, the Group is able to expand its customer base by establishing and maintaining relationships with some major PRC telecommunication operators and other major PRC customers (including China Comservice and a leading PRC telecommunication tower infrastructure service provider).

Leveraging on its excellent experience and knowledge as well as its high-quality products and services, the Group has successfully built up a good reputation in the industry and established a strong relationship with its customers, thus achieving a high customer retention rate. For FY2020, FY2021, FY2022 and six months for FY2023, approximately 46.2%, 45.7%, 48.1% and 69.7%, respectively, of the Group's customers were repeat customers, and their revenue contribution accounted for approximately 83.3%, 85.9%, 87.6% and 77.4% of the Group's total revenue in FY2020, FY2021, FY2022 and six months for FY2023 respectively. In addition, for FY2020, FY2021, FY2022 and six months for FY2023, the Group's overall success rate of its tenders (calculated based on the aggregate number of successful tenders divided by the aggregate number of tenders submitted for all business lines) was approximately 61.2%, 72.0%, 64.5% and 71.2%, respectively. The success rates of the Group's quotations for each business ranged from approximately 72.7% to 88.9%.

Research and development capabilities allow the Group to better serve its customers' needs and adapt to the fast-changing industry landscape

The Group has been engaged in the research and development of various types of software capable of performing a wide range of functions. Its research and development undertakings are supported by its strategically set up infrastructure. The Group places great emphasis on its in-house research and development capabilities and established its own research and development operation in 2003 supported by its in-house engineers and technical personnel to reduce its reliance on technical expertise and software development of third parties. As at June 30, 2023, the Group's research and development operation had 69 technical and support personnel and the majority of whom are engineers.

Through the accumulation of research and development experiences over the years, and through regular communication with customers, the Group has gained knowledge about industry developments and an understanding of customers' specific requirements, and thus possess the ability to develop software that are tailored to the needs of customers. The Group's recent research focuses include (i) the application of 5G and IoT); (ii) wireless communication; and (iii) big data and signal and data analysis. The results of the Group's research, such as new software or technologies, are then applied to different aspects of its services (such as data collection and analysis to complement its telecommunication network support services), or launched as software for general sale to its customers, or applied in the development of software that it customise for particular customers. With strong research, design and development capabilities, as at December 20, 2023, the Group has obtained 73 software copyrights and two invention patents in the PRC.

With an experienced management team leading its workforce to achieve further growth and capitalise market opportunities in the future

The Group has an experienced and dedicated management team led by its executive Directors, Mr. Jia Zhengyi, Mr. Cong Bin and Ms. Liu Ping, each of whom has over 18 years of experience in the information technology and telecommunication industry in the PRC, and all of them have been instrumental in spearheading the growth and development of the Group. In addition, its experienced senior management team has extensive operational expertise and in-depth understanding of the industry in which the Group operates. They are capable of identifying customers' specific needs and expectations and keeping abreast of the latest developments in the field, so as to captalise on market opportunities in the future.

Achieved stable overall business growth, major operating costs ratio kept improving

WellCell has delivered satisfactory financial performance, with revenue for FY2020 reaching RMB227 million, up approximately 11.4% year on year. Benefiting from the increase in revenue derived from its software related business of approximately RMB9.4 million, the total revenue of the Group for six months of FY 2023 grew by 10.3% year on year to approximately RMB114 million. In the meantime, the Group's major operating costs ratio kept improving with approximately 80.1%, 79.8%, 79.4% and 76.4% for FY2020, FY2021, FY2022 and six months of FY2023, respectively. Due to the revenue increase and cost reduction, the Group's profit for the six months of FY2023 increased by 56.4% year on year to approximately RMB14.7 million, and profit margin up by 3.8 percentage points to approximately 12.9%.

Mr. Jia Zhengyi, Executive Director, Chairman of the Board and CEO of WellCell says, "With approximately 20 years of excellent operating experience, WellCell has always kept abreast of industry development trends and is one of the few companies in the PRC market that can provide extensive telecommunications network support and ICT integration services. According to the CIC Report, those industries in which the Group operates are expected to experience considerable growth in the coming years. The management believes the Group is expected to have sustainable business growth. Through the proposed Share Offering and IPO, the Group plans to further enhance its competitiveness and expedite business growth in future."

Mr. Jia Zhengyi concludes, "Looking ahead, the Group will strengthen its financial capabilities in order to be in position to undertake more and larger ICT integration projects. The Group plans to improve its service capabilities, quality and offering by conducting research and development, and invests in the development of wireless telecommunication network testing software which will be positioned as an easy-to-use software and target ordinary non-technical users, so as to expand the pool of target users of its telecommunication network-related software and boost the revenue growth of its software sale business. Meanwhile, the Group also plans to expand its manpower in project management to strengthen its capability in exploring and undertaking new businesses opportunities. Leveraging its experienced management team and core competencies, WellCell will seize the opportunities and strive to increase its market share, to create better returns for shareholders and investors."

The Hong Kong Public Offering is expected to commence at 9:00 am on December 28, 2023 (Thursday) and to close at 12:00 noon on January 9, 2024 (Tuesday). The results of allocation in the Hong Kong Public Offering and Offer Price are expected to be announced or published via various channels on January 11, 2024 (Thursday). Dealings in Shares on the Stock Exchange are expected to commence on January 12, 2024 (Friday), with 2477 as the stock code.

Prospectus of the Company is available at the website of the Stock Exchange of Hong Kong at www.hkexnews.hk under the "HKEXnews > New Listings > New Listing Information" section, and the Group's website at www.wellcell.com.cn.

WellCell Holdings Co., Limited
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