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The information and statistics in this section, unless otherwise indicated, are derived from various private and official governmental publications, publicly available sources and the Frost and Sullivan Report, a market research report prepared by Frost and Sullivan and commissioned by our Group. We believe that the sources of the information in this section are appropriate sources for such information, and we have taken reasonable care in extracting and reproducing such information. We have no reason to believe that such information is false or misleading or that any fact has been omitted that would render such information false or misleading. The information prepared by Frost and Sullivan and set out in this section has not been independently verified by us, the Sole Sponsor, the [REDACTED], the [REDACTED], the [REDACTED] or any other party involved in the [REDACTED] and we do not give any representations as to its accuracy or correctness and accordingly it should not be relied upon in making, or refraining from making, any investment decision.

SOURCE AND RELIABILITY OF INFORMATION Our Group commissioned Frost and Sullivan, an independent market research company, to conduct an analysis of, and to produce a report on, the logistics, third party logistics service and cargo terminal operating service market study in and the PRC for use in this document. Frost and Sullivan is an independent global consulting firm founded in 1961, and offers industry research, market strategies and provides growth consulting and corporate training on a variety of industries. The information from Frost and Sullivan disclosed in this document is extracted from the Frost and Sullivan Report, a report commissioned by us for a fee of HK$650,000 and is disclosed with the consent of Frost and Sullivan. The Frost and Sullivan Report was undertaken through both primary and secondary research obtained from various sources. Primary research included interviews with industry experts and participants in the PRC logistics services market. Secondary research involved reviewing the statistics published by the government official statistics, industry publications, annual reports and databasedonFrostandSullivan’s own database. Frost and Sullivan also adopted the following primary assumptions while making projections on the macroeconomic environment, the overall the logistics, third party logistics service and cargo terminal operating service markets in Hong Kong and the PRC: . Hong Kong and the PRC’s economy are expected to grow at a steady rate supported by favourable government policies as well as global economic recovery, among other factors; and . The social, economic and political environment of Hong Kong and the PRC (including its relationship with the United States) is likely to remain stable during the forecast period, which would ensure a sustainable and steady development of the logistics services market in Hong Kong and the PRC. Except as otherwise noted, all of the data and forecasts contained in this section are derived from the Frost and Sullivan Report. The year-end for the market size and competitive landscape analysis is based on our financial year (i.e. 31 March) and the year-end for the other tables is based on calendar year (i.e. 31 December) unless otherwise specified. Our Directors confirm that after taking reasonable care, the sources of information used in this section, which are extracted from the Frost and Sullivan Report, are reliable and not misleading as Frost and Sullivan is an independent professional market research agency with extensive experience, and there is no material adverse change in the overall market information since the date of the Frost and Sullivan Report that would materially qualify, contradict or have an impact on such information. MACRO ECONOMIC ENVIRONMENT OVERVIEW OF GLOBAL AIR CARGO SERVICES MARKET Industry Value Chain of Air Cargo Services Market Service providers in air cargo services market usually offer specialised logistics services to the shipper at the origin and at the destination of the shipment throughout the entire logistics operation. Prior to delivery, the freight forwarder will arrange flight bookings, cartage for crating and consolidation at the service provider’s facility and delivery to airport at the origin for loading. The service continues when the cargo arrives at the cargo terminal of its destination where agency or partner of the freight forwarder will provide services including crate breakdown, storage, distribution and delivery to the consignee through warehousing and land freight transportation services providers.

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The flowchart below illustrates the value chain of the air cargo services market:

Outbound Outbound Inbound Inbound Forwarding Handling Airline Handling Forwarding Agent Agent Agent Agent Receiver

Transportation Cargo Transportation Air Transport Cargo Transportation Transportation Shippcr terminal operation terminal operation terminal operation terminal operation Documention Warehousing Ramp Handling Documention Terminal Trasport Ramp Handling Warehousing Deconsolidation Customs Office Customs Office

Source: Frost & Sullivan International Merchandise Trade Volume With the undesirable global economic performance in 2015 and 2016, the international trade performance, as well as the performance of the APEC countries, has been heavily affected in recent years. From 2013 to 2018, the international merchandise trade volume has decreased from USD18,950.6 trillion in 2013 to USD19,475.4 trillion in 2018, representing a CAGR of approximately 0.5%. The merchandise trade in APEC has also recorded a positive CAGR of approximately1.4%from2013to2018.Theeconomy in European countries and USA have recovered since 2017 which has also improved the international trade performance since 2017. It is therefore expected the merchandise trade volume will reach approximately USD24,735.3 trillion by 2023 with a CAGR of approximately 4.9% from 2019 to 2023. International Merchandise Trade Volume (World & APEC Region), 2013–2023E

CAGR 2013-2018 2019E-2023E

Total 0.5% 4.9% USD Trillion APEC 1.4% 7.7% 30,000

APEC Rest of the World -0.2% 1.8% 24,735.3 25,000 Rest of the World 23,577.2 22,480.4 21,409.9 20,429.3 19,475.4 20,000 18,950.6 18,984.5 17,731.9 16,530.6 16,030.5 12,956.4 13,928.1 11,180.4 12,052.5 15,000 8,938.3 9,114.7 9,585.4 10,352.2 8,320.2 7,990.7 8,811.3 10,000

9,890.0 10,077.1 10,229.5 10,427.9 10,620.8 10,807.2 5,000 10,012.4 9,869.8 8,210.4 8,039.8 8,920.6

0 2013 2014 2015 2016 2017 2018 2019E 2020E 2021E2022E 2023E

Source: World Trade Organisation, Frost & Sullivan OVERVIEW OF AIR CARGO SERVICES MARKET IN HONG KONG AND THE GREATER BAY AREA Hong Kong plays an important role in the international air cargo market as it remains as the world’s busiest air cargo hub in 2018 according to the Airports Council International. There are currently 3 cargo terminals at the Hong Kong International Airport which are capable to process about 7.4 million tonnes of cargo annually, whereas the Guangzhou Baiyun International Airport and the Shenzhen Bao’an International Airport are two of the five largest air cargo airports in China in 2018. During 2013 to 2018, air cargo service market experienced a steady growth, which is reflected by the fact that air cargo throughput increased from approximately 4.1 million tonnes in 2013 to 5.0 million tonnes in 2018, representing a CAGR of 4.1%. The increase of inbound and outbound cargo is driving the air cargo throughput growth in Hong Kong. The increasing demand from the growing global e-commerce activities is expected to provide a strong growth momentum to the air cargo market growth at a CAGR of approximately 2.6% from 2019 to 2023, reaching approximately 5.6 million tonnes in 2023.

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Market Size of Cargo throughput by Air Transport in Hong Kong, 2013–2023E

2013-2018 2019E-2023E CAGR 4.1% 2.6% Million Tonnes

6.0 5.6 5.3 5.4 5.5 5.1 5.1 4.9 5.0 5.0 4.4 4.4 4.5 4.5 4.1 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 2013 2014 2015 2016 2017 2018 2019E 2020E 2021E2022E 2023E

Source: Frost & Sullivan Market Potential in the Greater Bay Area The rapid development of air logistic infrastructure in Hong Kong, Guangzhou and Shenzhen have supported the growth of air logistic market in the Greater Bay Area recently. From 2013 to 2017, the total air cargo throughput has increased from approximately 6,901.4 thousand tonnes in 2013 to 9,276.3 thousand tonnes in 2018, representing a CAGR of 6.1%. With the governmental policy on developing the Greater Bay Area, the logistic service in the Area is expected to grow further. It is therefore expected that the total air cargo throughput will reach approximately 11,714.3 thousand tonnes by 2023, with a CAGR of approximately 5.0% from 2019 to 2023. Cargo Throughput by Air Transport in the Greater Bay Area, 2013–2023E

2013-2018 2019E-2023E CAGR 6.1% 5.0% Thousand tonnes 11,714.3 12,000 11,103.6 10,544.7 11,000 10,014.0 9,628.8 10,000 9,276.3 8,597.1 9,000 7,956.0 8,000 7,374.4 7,537.7 6,901.4 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 2013 2014 2015 2016 2017 2018 2019E 2020E 2021E2022E 2023E

Source: Frost & Sullivan Cost Factors of Air Cargo Services Market Logistics related personnel include labour who are engaged in (i) import and export trading; (ii) land transport; and (iii) other logistic services such as warehouses. The wage indices have increased at a CAGR of approximately 3.4% during 2013 to 2018. Warehouses are important facilities within the logistics chain and are often located in private flatted factories. The rental price indices have raised at a CAGR of approximately 6.6% from 2013 to 2018. Due to the healthy growth of Hong Kong economy, it is expected the performance of the international trade will be improved. Hence, the labour wage of logistics industry and rental price for private flatted factories would be expected to result in a positive CAGR of approximately 3.1% and5.0%during2019to2023respectively.

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Wage indices of logistic related Rental price indices of private flatted personnel (Hong Kong), 2013-2023E factories (Hong Kong), 2013-2023E

2013-2018 2019E-2023E 2013-2018 2019E-2023E

CAGR 3.4% 3.1% CAGR 6.6% 5.0%

155 200 150 190 145 174.9 137.9 180 166.5 140 133.6 170 158.5 135 129.5 160 151.1 130 125.6 144.1 121.8 150 125 137.3 118.3 140 120 129.5 112.9 130 123.2 115 109.8 118.4 110 106.2 120 108.7 102.3 110 105 100.0 100.0 100 100

0 0 2013 2014 2015 2016 2017 2018 2019E 2020E 2021E2022E 2023E 2013 2014 2015 2016 2017 2018 2019E 2020E 2021E 2022E 2023E

Source: Census and Statistics Department of Hong Kong, Frost & Sullivan Entry Barriers of Air Cargo Services Market Strong and Experienced Management Seasoned management team with extensive experience and proven track record serve as the entry barrier to the air cargo services market in Hong Kong. Players who have demonstrated successful delivery in air cargo services market with efficiencies and flexibilities in their services are generally preferred by the customers. An experienced team with extensive market know-how enables the company to adjust its operations that fit the market trends and needs. New entrants without experienced management team would find it hard to compete with the existing players. Significant Initial Investment A substantial initial funding is required for new market entrant to commence the air cargo services business, which covers sourcing of transportation services, investment in specific machineries and recruitment of labour and professionals. Compared with the new entrants, some players may enjoy the economies of scale, such as more-effective manpower deployment, thus having greater flexibility in cost control and capital management. The aforementioned cost factors are likely to exert a high financial pressure on the new market entrants. Established Relationship and Network Possessing proven expertise and project reference is the key to developing business relationship with other market players, namely airlines and shipping companies. The leading players in air cargo services market have been forming strong partnerships with the industry players along the value chain. New entrants without established connections may not be able to negotiate for the competitive prices and ideal timing for transport, compromising its competence and offering to customers compared to other established players in the market. Industry Expertise and Service Offering The major players are increasing competitiveness by providing integrated solution in pick-up, delivery, storage and other value-added services. The track record, ability to deliver within tight timeline and strong manpower make the large scale companies the first choice to the international logistic companies. Industry expertise and integrated solutions add value to clients by making plans on collection and delivery of cargos, serving as an entry barrier to the new market entrants. OVERVIEW OF AIR CARGO TERMINAL OPERATION SERVICES MARKET IN HONG KONG AND THE PRC Air cargo terminal operation services is the management and handling of air cargoes upon their arrival from aircrafts into the terminal and delivery of the cargoes to the appropriate warehouses with the air cargo terminal for storage and pick up. The types of air cargoes are including mail, courier packages, cold or temperature control cargoes, etc. It is a common practice that air cargo terminal management, air cargo services providers and international logistics

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INDUSTRY OVERVIEW conglomerates to contract out the terminal operating services including cargo pick-up and delivery, cargo packing and crating services, weighing services, warehouse management and other supporting service etc. to specialised sub-contractors. The flowchart below illustrates the value chain of the air cargo terminal operation services market: Illustration of Air Cargo Terminal Operation Services

Cargoes Transfer Cargoes Processing Immediate release/ Urgent cargoes handling

Pallets and bins Cargoes or ULDs Cargoes Breakdown Cargoes shipment transfer preparation and Sorting

Cargoes storage

Source: Frost & Sullivan The total revenue generated from the air cargo terminal operation services section increased steadily at a CAGR of approximately 4.4%, from HK$1,007.7 million in 2013 to approximately HK$1,250.8 million in 2018 driven by the growing global e-commerce activities and the strong business infrastructure in Hong Kong. Recently, U.S. and the PRC have been engaged in a trade war where each country has planned to impose tariff on goods traded between two countries. According to the Frost & Sullivan Report, the air cargo terminal operation services market in the first half of 2019 was affected by the uncertainty regarding the future trade relationship between the U.S. and the PRC, and accordingly, it is further expected that such uncertainty may result in a drop in the volume of international trade and the demand for the air cargo ground handling services in the foreseeable future. Nonetheless, the air cargo terminal operating services market is still expected to grow slightly in the coming years at a CAGR of approximately 2.3% from 2019 to 2023, reaching approximately HK$1,384.2 million in 2023. Market Size of Air Cargo Terminal Operation Services by Revenue (Hong Kong), 2013–2023E

2013-2018 2019E-2023E CAGR 4.4% 2.3% HK$ Million 1,600 1,384.2 1,400 1,306.5 1,341.3 1,250.8 1,263.3 1,278.4 1,185.5 1,200 1,086.7 1,110.1 1,007.7 1,046.5 1,000

800

600

400

200

0 2013 2014 2015 2016 2017 2018 2019E 2020E 2021E2022E 2023E

Source: Frost & Sullivan Market Drivers Strategic Geographical Location Hong Kong is located at the centre of the Asia Pacific with great connectivity and accessibility to the major cities and markets in the world and Mainland China by a world-class international airport which encourage moving of goods through Hong Kong as a re-export hub. Moreover, driven by the rapidly rising volume of trade, the decreasing cost of air transport services in Hong Kong has been falling over the past few decades. Air transport becomes more and more competitive relative to other modes of transport which has further driven the air freight forwarding and air cargo terminal operation services market in Hong Kong.

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Efficient Air Cargo Operation With the largest air cargo terminal in the world, the Hong Kong Air Cargo Terminal Operation Service becomes one of the most competitive service providers in the current Asia Pacific market. Hong Kong had the highest air cargo throughput, with approximately 5,018 thousand tonnes, in 2018. And the air cargo terminals in Hong Kong are capable of processing this huge amount of air cargoes every year efficiently. For example, could meet their performance standard every month with more than 98.0% pass rate. It shows the Hong Kong air cargo terminal operation services are able to meet the growing market demand and become a dominant service provider in the market. Mainland Integration Hong Kong acts as an important international logistic hub between the Mainland and the foreign carriers because of its geographical and administrative advantages. The rapid development of logistic services and ports in Southern China also lower the cost of cross boundary transportation between Hong Kong and Mainland China. Moreover, with the opening of Hong Kong-Zhuhai- Macau Bridge in 2018, the integration between the airports in Hong Kong, Zhuhai and Macau would enhance the efficiency of air cargo services in Hong Kong. Moreover, the recent collaboration of Hong Kong Airport and Network (the logistics arm of Alibaba Group) has further fostered the integration between mainland and Hong Kong. The mainland internet giant will develop and manage the premium logistics centre at Kwo Lo Wan in the South Cargo Precinct of HKIA which is expected to reinforce the world leading position in the air cargo services. As a result, the whole air cargo services market in Hong Kong air cargo terminal would be further driven and become more competitive in Asia Pacific region. Market Potential in the Greater Bay Area As one of the major feature of China’s strategic initiative in the Vision and Actions on Jointly BuildingtheSilkRoadEconomicBelt and 21st Century Maritime Silk Road and the 13th Five-Year Plan, the Greater Bay Area which extends across Hong Kong, Macau and nine Pearl River Delta (PRD) cities has been undergoing cluster development according to the development plan by the National Development and Reform Commission (NDRC). With the strong business infrastructure underpinned by the leading airports and ports in the PRC regions, the Guangdong-Hong Kong- Macau Bay has one of the largest air and sea cargo throughputs in the world. The collective development of the Greater Bay Area foster the movement of talents, goods and capital across the regions which provide further growth momentum to the air cargo terminal operation services market in the region, especially Hong Kong. Underpinned by the strong consumption from e-commerce in the PRC, the air cargo terminal ground handling services by revenue in the Greater Bay Area has increased from approximately RMB1,749.2 million in 2013 to RMB2,229.6 million in 2018 at a CAGR of approximately 5.0%. With the anticipated synergy from the collective development in the region, the air cargo terminal ground handling services is expected to reach approximately RMB2,856.4 million in 2023 at a CAGR of approximately 5.1% from 2019 to 2023. Market Size of Air Cargo Terminal Operating Services by Revenue (the Greater Bay Area), 2013–2023E

2013-2018 2019E-2023E CAGR 5.0% 3.1% RMB Million 2,587.2 2,600 2,507.0 2,358.5 2,429.2 2,400 2,229.6 2,292.0 2,127.5 2,200 2,006.9 1,923.2 2,000 1,749.2 1,818.9 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 2013 2014 2015 2016 2017 2018 2019E 2020E 2021E2022E 2023E Source: Frost & Sullivan

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COMPETITIVE LANDSCAPE OVERVIEW OF AIR CARGO TERMINAL OPERATION SERVICES MARKET There are currently three air cargo terminals at Hong Kong airport, namely Super Terminal 1 (ST1), Asia Airfreight Terminal (AAT) and Cathay Pacific Cargo Terminal (CPCT). Air terminal operation services providers either offer specialised logistics services to either the air terminal or the air cargo operators. The established market players usually have strong business relationship with the air terminals and the air cargo operators. In 2018, the total revenue generated from air cargo terminal operation services in Hong Kong reached HK$1.25 billion. The air cargo terminal operation services market was concentrated with less than 20 companies in the industry. The air cargo terminal operation services market is considered to be concentrated with top five players contributing over 86.2% of market share in 2018. In 2018, our Group ranked the third with a market share of approximately 15.1% as the major air cargo operation services operator at Asia Airfreight Terminal (AAT). Revenue of Air Cargo Terminal Operation Services Market in Hong Kong Rank Market Participant Estimated Revenue Market Share (Million HK$) (%) 1 Company A 370.5 29.6% 2 Company B 327.2 26.2% 3 Our Group 188.7 15.1% 4 Company C 98.3 7.9% 5 Company D 94.0 7.5% Subtotal 1,078.7 86.2%

Source: Frost & Sullivan The air terminal operation services market in the Greater Bay Area is still at development stage with increasing number of players entering the market. Currently, there are over a hundred market players in the air terminal operation services in the Greater Bay Area. The industry is competitive and highly fragmented. The growing air cargo throughput has fostered the improvement of airport and logistics infrastructure in the Greater Bay Area which facilitates the future growth of air terminal operations and thus the air terminal operation services in the area. OVERVIEW OF TRANSPORTATION AND WAREHOUSING SERVICES MARKET IN HONG KONG AND GREATER BAY AREA Transportation and warehousing is the implementation, control and planning of the storage and movement of the goods from origin to the specified destination from customers which involves services of the integration of information, transportation, inventory, warehousing, material handling, packaging, security etc. Based on various transport infrastructures, the transportation and warehousing services market in Hong Kong is mainly segmented into air, land and water transport. The land freight transportation services by revenue in Hong Kong witnessed a mild growth from approximately HK$18.3 billion in 2013 to HK$22.3 billion in 2018, at a CAGR of approximately 4.0%. The increasing trade demand in Asia and mainland China underpinned by the strong consumption from e-commerce has spurred the demand for land freight transportation services. And with the completion of Hong Kong-Zhuhai-Macau Bridge in 2018, the market size of the third party logistic services are expected to grow in the coming years steadily. By 2023, the Hong Kong land freight transportation service is expected to reach approximately HK$24.7 billion with a CAGR of approximately 2.3%.

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Market Size of Land Freight Transportation Services by Revenue (Hong Kong), 2013–2023E 2013-2018 2019E-2023E CAGR 4.0% 2.3% HK$ Billion 26 24.7 23.4 24.0 24 22.3 22.6 22.9 21.2 22 19.6 20.1 20.1 20 18.3 18 16 14 12 10 8 6 4 2 0 2013 2014 2015 2016 2017 2018 2019E 2020E 2021E2022E 2023E Source: Frost & Sullivan Warehouse and other value-added services in a logistics operation include storage, inventory management, and other value-added service such as bar-coding, re-packaging, labelling services etc. As land is one of the scarce resources in Hong Kong, warehouse and other value-added services market is an integral part of the logistics industry in Hong Kong underpinning the entire logistics market. The warehouse and other value-added services market has recorded a strong growth from HK$5.9 billion in 2013 to HK$10.1 billion in 2018, representing a CAGR of 11.6% which was mainly due to the surging property prices contributing to the rising business receipts of the warehousing services. The expected completion of new infrastructure projects such as expansion of Hong Kong International Airport, completion of the Hong Kong-Macau-Zhuhai Bridge and Tuen Mun- Link in the coming years will encourage movement of goods in and out of Hong Kong and drive the demand for warehousing services. Thus, the warehouse and other value- added services market is anticipated to reach HK$14.9 billion by the end of 2023, representing a CAGR of 8.6%. Market Size of Warehouse and Other Value-Added Services by Revenue (Hong Kong), 2013–2023E

2013-2018 2019E-2023E CAGR 11.6% 8.6% HK$ Billion 14.9 15 13.6 12.5 11.5 10.7 10.1 10 9.1 8.1 7.3 6.5 5.9

5

0 2013 2014 2015 2016 2017 2018 2019E 2020E 2021E2022E 2023E Source: Hong Kong Census and Statistics Department, Frost & Sullivan Market Drivers Expansion of distribution network through multi-channels The expansion of distribution network through multi-channels, especially, e-commerce platform, is likely to be a key driver. Increasing number of market players in the retail industry is embracing the online platform in sales and marketing strategy. Supported by development of digital media, robust logistics infrastructure and adaptation to online shopping experiences, the e- commerce platform has enjoyed the growth and become one the major sales channels in Hong Kong and the PRC. As a strategic gateway to Southern China and at the heart of Asia, Hong Kong, therefore, acts as the logistics hub for cross-border transactions where PRC online customers order foreign goods. The booming e-commerce in Hong Kong also gives a rise to the amount of imported goods. The growing online shopping and cross-border transaction is expected to stimulate the demand for warehousing and other value-added services in Hong Kong.

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Warehouse and other value-added market benefited by world-class infrastructure and integrated service expertise Hong Kong’s world-class infrastructure and integrated service expertise contributes to its position as the international logistics hub in Asia. Hong Kong benefits from its geographic advantage of locating at the centre of a global and multimodal network of cargo and transport routes via land, sea and air, making it an unparalleled supply chain. According to Asian Logistics and Maritime Conference, Hong Kong is one of the busiest container ports in the world, with around 410 weekly sailings to about 520 destinations around the globe, of which about 240 underline Hong Kong’s position as a regional hub port. On the other hand, the growth of air traffic demand in both passenger and cargo sector would be further supported by the expansion of the airport infrastructure into a three-runway system (3RS). The completion of Liantang/Heung Yuen Wai Boundary Control Point in 2019 could handle more than 20,000 vehicular trips per day which could further enhance the land transportation service capacity between Hong Kong and the PRC. Expertise, experience and networks are also the key successful factors for modern international and domestic logistic operations. Together with flexibility and efficiency in supply chain management, Hong Kong offers high security, quality assurance and intellectual property protection, which are essential for the distribution of high-value products and brand-name goods. The development of logistics industry is likely to translate into growth opportunities for the warehouse and other value- added market in Hong Kong. Continual development of economies and rise of production bases in the PRC The development of Hong Kong third party logistic services is highly dependent on the cross- border flow of goods. With the enhancing participation in global supply chain and established network of industries, the production bases in the Pearl River Delta region are steadily growing. More than 80 billion tonnes of cargo throughput are recorded in Pearl River Delta Region in 2018. The economy of the PRC is also growing steadily despite of the economic reform is under progress. As a result, trade activity is expected to continue to increase in the Pearl River Delta Regions. Due to the geographical advantage and the limitation of the import regulation of the PRC, most of the import goods are going through the Hong Kong region and enter the PRC via land transportation service. The increasing import and export of raw materials and consumer goods through Hong Kong will stimulate the logistic market. In light of continual development of economies and rise of production bases in the Pearl River Delta Region, warehouse and other value-added market in Hong Kong is likely to enjoy the growth. Market Potential in the Greater Bay Area With the strong growth of e-commerce market and increasing demand for Chinese products, along with the development of the Greater Bay Area, the land cargo transportation in Shenzhen and Guangzhou has rapidly increased from approximately RMB43.2 billion in 2013 to RMB65.8 billion in 2018, representing a CAGR of approximately 8.8%. It is estimated that the demand for land cargo transportation will continue to grow which will reach RMB82.5 billion by 2023 with a CAGR of 4.7% from 2019 to 2023. Market Size of Land Freight Transportation Services by Revenue (Shenzhen and Guangzhou), 2013–2023E

2013-2018 2019E-2023E Annual Cargo Traffic (Shenzhen CAGR 8.8% 4.7% RMB billion and Guangzhou), 2018 110

100 0.2% 90 82.5 1.3% 78.8 75.2 80 71.7 68.6 65.8 70 62.1 31.7% 58.0 60 53.1 48.0 50 43.2 40 66.8% 30 20 10 Land Water Air Railway 0 2013 2014 2015 2016 2017 2018 2019E 2020E 2021E2022E 2023E

Source: Frost & Sullivan

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From 2013 to 2018, the market size of warehousing and other value-added services in Shenzhen and Guangzhou has increased from approximately RMB27.0 billion in 2013 to RMB38.8 billion in 2018, representing a CAGR of approximately 7.6%. With the planned development of logistic hub in the Greater Bay Area, the warehousing and other value-added service market in Shenzhen and Guangzhou is expected to further increase to RMB51.1 billion by 2023, representing a CAGR of approximately 5.6% from 2019 to 2023. Market Size of Warehousing and Storage Services by Revenue (Shenzhen and Guangzhou), 2013–2023E

2013-2018 2019E-2023E CAGR 7.6% 5.6% RMB billion 60 55 51.1 48.3 50 45.7 43.2 45 41.0 38.8 40 34.8 36.7 35 32.2 29.4 30 27.0 25 20 15 10 5 0 2013 2014 2015 2016 2017 2018 2019E 2020E 2021E2022E 2023E

Source: Frost & Sullivan COMPETITIVE LANDSCAPE OVERVIEW OF THE TRANSPORTATION AND WAREHOUSING SERVICES MARKET The overall transportation and warehousing services market considered as a highly fragmented market with more than 11,000 service providers of various scale presence in Hong Kong in 2018. It is a common market practice that the customers and sellers outsource elements of the company’s distribution and fulfilment services to certain logistic services providers such as courier companies in order to better control the time and cost as well as improve the operation flexibility. According to the Census and Statistics Department, more than 30 thousand persons were engaged in this industry in 2018. With over 7,400 land freight transportation establishments and more than 200 operators with cross-border capability in Hong Kong in 2018, land freight transportation services industry is considered to be a high labour-intensive industry. It is one of the major components of the logistics operation. It requires a huge capital investment as it requires a fleet of heavy transportation vehicles. And obtaining the license for cross border transportation requires specific specifications. As a result, land freight transportation service is usually an outsourced service to better control the cost as the demand for human capital and vehicles are fluctuating with the cargo throughput throughout the year. The transportation and warehousing services market in the Greater Bay Area is considered to be a highly fragmented market. The estimated number of establishments of the transportation and warehousing service providers in 2018 are more than 20,000 units and 1,000 units respectively. With the support from the PRC government, the foreign capital is increasingly to develop logistic serviceintheGreaterBayAreaespeciallyinGuangzhou and Shenzhen. The larger players tend to provide integrated logistic service such as handling, packaging, and warehousing in order to increase competitiveness while the smaller players focus on single service.

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