Chairman Statement

Dear Friends,

We successfully completed initial public offering under the volatile capital market conditions, and raised net proceeds of approximately HKD42.2 million. Successful listing enables Mengke Holdings to set foot on international capital platform and turn a new page in business development. Supported by a widened shareholder base and an enhanced share capital, the Group acquired an increasing amount of financial resources to build up a solid foundation for future development.

Mengke Holdings is the leading cigarette packaging paper manufacturer in Hubei Province, China in terms of sales of cigarette packaging paper in year 2015. Currently the Group’s customers include some of the “Top 100 Enterprises” in the printing industry awarded by the 2016 China Printing Manager Annual Conference, such as Hubei Golden, and other leading cigarette package manufacturers in China, such as Beijing Leigh-mardon Pacific Packaging Co., Ltd., Wuhan Hongzhicai Packaging Company Limited and Wuhan Hongjinlong Printing Company Limited. The Group primarily engaged in the production of metallised packaging paper, mainly transfer metallised paper and laminated metallised paper, to be used as cigarette external packaging paper to produce cigarette packs and boxes; and the provision of processing services such as paper cutting or other paper processing work.

In 2016, economic growth in China continued to decelerate at a GDP growth rate of 6.7%, leading to a decrease in sales in the cigarette market. Despite the challenges from strict tobacco industry regulations and environmental law by the PRC government, the Group managed to cater for increasing market demand in quality product and maintain strong competitive advantages by stringent quality control and proactive research & development plan.

In 2017, the Group will expand its warehouse to meet the production needs during peak season, and also add two production lines to reach the annual production capacity of 285.8 million m. per year, so that the Group’s competitiveness will be further enhanced. In order to uplift the company’s overall efficiency and profitability, an indexing and digitized accounting system will be set up to manage effectiveness. The Group will proactively expand new markets on the firm foothold established, to Yunnan Province, Zhejiang Province and Hunan Province etc. in order to widen income sources.

Looking ahead, the Group will execute four major development strategies: (1) strengthen sales and marketing efforts to enhance relationship with existing customers and promote the current market position; (2) proactively implement marketing strategies and emphasise on new market development; (3) carry out comprehensive quality management and cost control to boost production effectiveness; and (4) invest more resources for the improvement of research and development capabilities.

It is expected that the cigarette industry would develop steadily as a result of market trend towards mid to high-end standard and persistent economic growth in China. The Group will grasp market opportunities and leverage its advantages in financing by the successful listing, whilst enhancing its capability of tender bidding so as to achieve magnificent results in the future.

On behalf of the Board, I would like to express my gratitude to the continuous support of all shareholders, investors, business partners and customers. The management team and all staff members of the Group will continue striving for better results for the Group and bringing returns to the shareholders.

Zhang Weixiang
Chairman and non-executive Director

Hong Kong, 27 March 2017

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