THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT SHOULD BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. BUSINESS OVERVIEW We are an integrated waste management solution provider in China, currently focusing on providing environmental hygiene services and hazardous waste treatment services. The markets for both services are highly fragmented in China. The environmental hygiene services market comprises two sectors based on the type of service provider, namely the government agency sector, where the service providers are local government agencies, and the enterprise sector, where the service providers consist of enterprises (whether state-owned or non-state owned). In 2018, the market size of the enterprise sector amounted to approximately RMB101.1 billion, representing approximately 38.6% of the total environmental hygiene services market. We are the fourth largest provider in the enterprise sector of the environmental hygiene services market in China in terms of 2018 revenue, with a market share of 1.6% of the enterprise sector and 0.6% overall, according to the F&S Report. In the hazardous waste treatment services market, in terms of total designed treatment capacity for waste disposal of projects in operation (including projects in trial operation), we ranked sixth in China at the end of 2018 with a market share of 0.7%, according to the same source. Our environmental hygiene services have been expanding rapidly. For the years ended December 31, 2016, 2017 and 2018 and the six months ended June 30, 2019, we had one, 71, 106 and 112 revenue-generating environmental hygiene service projects, respectively. As of June 30, 2019, environmental hygiene service projects that we operated covered 23 provinces, municipalities and autonomous regions. In addition, 47 of these projects had total contract value exceeding RMB100 million. The environmental hygiene service market in China has experienced significant growth in recent years, driven by factors such as (i) the continued increase in outsourcing of such services by China’s local government agencies to enterprises; and (ii) continued demand for higher standard of quality of living environment by the Chinese population, according to the F&S Report. We believe that our local knowledge, reputation and connections have positioned us well to benefit from such growth. As of June 30, 2019, we had five hazardous waste treatment projects in operation and two hazardous waste treatment projects in trial operation. As of December 31, 2018, treatment facilities of our projects that engaged in waste disposal had a total designed treatment capacity of 253,050 tons per annum, ranking sixth in China, according to the F&S Report. Treatment facilities of the other projects that engaged in recycling and reuse had a total designed treatment capacity of 340,000 tons per annum, as of the same date. We believe that our in-depth experience and capabilities have distinguished us from our competitors in this market in various aspects. First, we have a broad range of technical capabilities. Our treatment methods include all four of the major methods currently available on the market. Among the 46 major categories of hazardous waste under the National Catalog of Hazardous Waste (國家危險廢物名錄), we are qualified to treat 38 categories. In addition, we have a proven track record of compliance with environmental and safety laws in all material respects, which we believe is attributable in significant part to our management’s experience and capabilities. With increasingly stringent environmental regulations imposed by the PRC government, a number of regions in China face shortages in hazardous waste treatment facilities. –97– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT SHOULD BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. BUSINESS We believe we have benefited from strong support from BEWG and BEHL as our shareholders. Both BEWG and BEHL are Hong Kong Stock Exchange listed companies. We believe that our shareholders’ nationwide customer base, reputation and brand recognition have contributed and will continue to contribute to our expansion strategy. For the years ended December 31, 2016, 2017 and 2018 and the six months ended June 30, 2019, our revenue from continuing operations amounted to HK$24.6 million, HK$912.4 million, HK$2,211.8 million and HK$1,475.3 million, respectively. Net profit from our continuing operations amounted to HK$19.2 million, HK$64.9 million, HK$213.9 million and HK$154.3 million for the years ended December 31, 2016, 2017 and 2018 and the six months ended June 30, 2019, respectively. COMPETITIVE STRENGTHS We believe the following competitive strengths enable us to succeed and distinguish us from our competitors. Uniquely-positioned waste management solution provider with complementary and synergistic businesses We are uniquely-positioned as one of a select group of major waste management service providers in China that operate in both environmental hygiene service market and hazardous waste treatment market, according to the F&S Report, which we believe benefits us in the following aspects: • “One-stop solution” solid waste service provider. Our environmental hygiene services primarily target at municipal solid waste, whereas our hazardous waste treatment services primarily target at industrial waste. With the issuance of the work plan for the zero-waste city pilot project《 ( 「無廢城市」 建設試點工作方案》) by the State Council in December 2018, the PRC government is expected to promote the construction of zero-waste cities that aims to minimize the amount of waste produced, strengthen recycling programs and ensure that hazard-free waste disposal by 2020. Both our environmental hygiene services and our hazardous waste treatment business are offered consistent with these objectives. While the local governments engage us to provide environmental hygiene services in an area, they may introduce us to provide hazardous waste treatment services to the industrial companies in the same area. Thus, our ability to offer one-stop solution in treating both municipal solid waste and industrial waste via our environmental hygiene services and hazardous waste treatment services, respectively, provides us with more opportunities to participate in new projects and expand our market share. • Complementary business model. Our hazardous waste treatment business requires significant capital investment over a relatively longer time period, compared to our environmental hygiene business. However, it typically generates higher gross profit margin than our environmental hygiene services. On the other hand, compared to our hazardous waste treatment business, our environmental hygiene services generally require less capital investment. It is able to generate revenue and cash flow within a shorter time period, and provides us with a lower yet stable gross profit margin. We believe that the complementary and synergistic nature of our two major businesses will help us maintain our sustainable growth in future. –98– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT SHOULD BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. BUSINESS Leader in the fast-growing environmental hygiene services The environmental hygiene services market in China is highly fragmented. The environmental hygiene services market comprises two sectors based on the type of service provider, namely the government agency sectors, where the service providers are local government agencies, and the enterprise sectors, where the service providers consist of enterprises (whether state-owned or non-state owned). In 2018, the market size of the enterprise sector amounted to approximately RMB101.1 billion, representing approximately 38.6% of the total environmental hygiene services market. We are the fourth largest provider in the enterprise sector of the environmental hygiene services market in China in terms of 2018 revenue, with a market share of 1.6% of the enterprise sector and 0.6% overall, according to the F&S Report. Our environmental hygiene services have been expanding rapidly. For the years ended December 31, 2016, 2017 and 2018 and the six months ended June 30, 2019, we had one, 71, 106 and 112 revenue-generating environmental hygiene service projects, respectively. As of June 30, 2019, environmental hygiene service projects that we operated covered 23 provinces, municipalities and autonomous regions. In addition, 47 of these projects had total contract value exceeding RMB100 million. The local knowledge, reputation and connections that we build in these cities position us well to penetrate the market further in these areas and expand into surrounding areas. China’s environmental hygiene service market has experienced significant growth in recent years, increasing from RMB138.9 billion in 2014 to RMB261.8 billion in 2018 at a CAGR of 17.2%, and is expected to further increase to RMB516.6 billion in 2023 at a CAGR of 14.6%, according to the F&S Report. We expect to benefit from the following key industry trends identified in the F&S Report: • Increasing enterprise participation. China’s local government agencies are expected to increase outsourcing of environmental hygiene services to enterprises due to efficiency and other reasons. Market share of enterprises in such services in China increased from 11.6% in 2014 to 38.6% in 2018, and is expected to reach 71.0% in 2023. • Increasing focus on quality of life. As population of urban areas continue to increase due to continuing urbanization, issues relating to the environment and quality of life in urban areas are receiving greater focus from the government and local residents. As a result, the investment on urban environmental sanitation in China increased from RMB49.5 billion in 2014 to RMB176.0 billion in 2017 with a CAGR of 52.6%. It is expected that the PRC government would increase investment on environmental hygiene service projects in the coming years.