THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THAT THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT INDUSTRY OVERVIEW Potential investors should note that Ipsos has been engaged by the Company to prepare the Ipsos Report to provide an overview of the market landscape and competitive analysis of the full-service Chinese restaurant industry in Hong Kong and Shenzhen, which will be used in whole or in part in this document. The information extracted from the Ipsos Report should not be viewed as a basis for investments provided by Ipsos and references to the Ipsos Report should not be considered as the opinion of Ipsos as to the value of any security or the advisability of investing in the Company. The information and statistics set out in this section have been extracted from the Ipsos Report compiled by Ipsos and other publicly available sources. The Group believes that the sources of this information are appropriate sources for such information and have taken reasonable care in extracting and reproducing such information. The Group has 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 has not been independently verified by the Group, the Joint Lead Managers, the Sponsor, the Underwriters or any other party involved in the [REDACTED] and no representation is given as to its accuracy. Accordingly, such information should not be unduly relied upon. COMMISSIONED REPORT FROM IPSOS The Company commissioned Ipsos, an independent market research company, to conduct an analysis of and produce the report on the full-service Chinese restaurant industry in Hong Kong and Shenzhen, for a total fee of HK$478,000, which the Sponsor believes such reflects the market rate. The Directors confirm that Ipsos, including all of its subsidiaries, divisions and units, is independent of and not connected with the Group in any way. Ipsos has given its consent to quote from the Ipsos Report and to use information contained therein in this document. Founded in Paris, France, in 1975 and publicly-listed on the Paris Stock Exchange in 1999, Ipsos SA acquired Synovate Ltd. in October 2011. After the combination, Ipsos became the third largest research company in the world which employs approximately 16,000 full-time personnel worldwide across 85 countries. Ipsos conducts research on market profiles, market size, share and segmentation analyses, distribution and value analyses, competitor tracking and corporate intelligence. The information contained in the Ipsos Report is derived by means of data and intelligence gathering methodology which includes: (i) desk research and (ii) primary research by interviewing key stakeholders and industry experts in Hong Kong and Shenzhen including, but not limited to, government officials (e.g. Shenzhen Human Resources and Social Security Bureau), restaurant operators, industry experts and associations (e.g. Shenzhen Catering Service Association) etc.. Intelligence gathered has been analysed, assessed and validated using Ipsos’ in-house analysis models and techniques. –64– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THAT THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT INDUSTRY OVERVIEW The following assumptions are used in the Ipsos Report: • It is assumed that the supply of and demand for full-service Chinese restaurant industry in Hong Kong are stable over the forecast period; and • It is assumed that there is no external shock such as financial crisis or natural disasters to affect the demand and supply of the full-service Chinese restaurant industry during the forecast period. RELIABILITY OF INFORMATION AND FUTURE FORECAST IN THE IPSOS REPORT The Group is of the view that sources of information used in this section, which are extracted from the Ipsos Report, are reliable and not misleading as Ipsos is an independent reputable professional research agency with extensive experience in their profession. Some of the analytical conclusions extracted from the Ipsos Report cover future forecasts. The following parameters are considered in the marketing sizing and forecasting model of the Ipsos Report: • GDP and GDP growth rates in Hong Kong and Shenzhen from 2010 to 2019; • Average annual household disposable income in Hong Kong and average per capita disposable income in Shenzhen from 2010 to 2014; • CPI for food and annual food expenditure for Hong Kong and CPI for food and per capita annual food expenditure for Shenzhen from 2010 to 2014; • Number of tourists visiting Hong Kong and Shenzhen from 2010 to 2014; • Total catering expenditure on dining by tourists visiting Hong Kong from 2010 to 2014; • Historical average wage trends for workers in the catering industry in Hong Kong and Shenzhen from 2010 to 2014; • Historical average retail rental rates in Hong Kong and Shenzhen from 2010 to 2014; • Number of players operating Cantonese restaurants in Hong Kong and Shenzhen in 2014; • Number of Cantonese restaurants in Hong Kong and Shenzhen in 2014; • Revenue generated from the Cantonese restaurant industry in Hong Kong and Shenzhen from 2010 to 2019; –65– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THAT THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT INDUSTRY OVERVIEW • Composite CPI of key raw materials in Cantonese restaurants in Hong Kong from 2010 to 2014; • Average spending per customer in the Cantonese restaurants industry in Hong Kong and Shenzhen from 2010 to 2014; and • Revenue generated from the non-Cantonese Chinese restaurant industry in Hong Kong from 2010 to 2019. The Sponsor and the Company consider such information to be reliable, accurate and not misleading after taking into account the following factors: (a) Ipsos is an independent reputable research agency with extensive experience in their profession; and (b) although the Ipsos Report includes forecast of the development of the full-service Chinese restaurant industry in Hong Kong and Shenzhen, they do not contain performance forecast of the Company. The Directors confirm that, to the best of their knowledge, after taking reasonable care, there is no material adverse change in the market information since the date of the Ipsos Report which may qualify, contradict or have an impact on the information in this section. HONG KONG Macroeconomic environment in Hong Kong According to the Hong Kong Census and Statistics Department, the GDP in Hong Kong grew from about HK$1,846.1 billion to about HK$2,070.8 billion between 2010 and 2014, at a CAGR of about 2.9%. The GDP of Hong Kong is expected to increase from around HK$2,137.0 billion in 2015 to around HK$2,440.1 billion in 2019 and maintain at a growth rate of between about 3.2% and about 3.7% from 2015 to 2019. Given the improvement of the global economy as well as the favourable economic ties with Mainland China, it is expected that the economic future of Hong Kong will remain optimistic, which is beneficial to the catering industry. According to the Hong Kong Census and Statistics Department, the average annual household disposable income in Hong Kong increased from around HK$596.1 thousand to around HK$750.9 thousand at a CAGR of about 5.9% from 2010 to 2014. The growth of the average annual household disposable income is primarily driven by the reduction of the unemployment rate. According to the Hong Kong Census and Statistics Department, the unemployment rate of Hong Kong declined from about 5.3% in 2010 to about 3.3% in 2014. Given the stable growth of the Hong Kong economy, it is expected that the average household disposable income of Hong Kong would grow at a steady pace in the coming years. –66– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THAT THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT INDUSTRY OVERVIEW According to the Hong Kong Census and Statistics Department, the CPI for food in Hong Kong increased from around 100.9 in 2010 to around 124.2 in 2014, at a CAGR of about 5.3%. Following a similar trend, the annual food expenditure also grew from around HK$156.6 billion to around HK$227.2 billion within the same time period, at a CAGR of about 9.8%. Driven by the growth in GDP, the annual household disposable income as well as the rising food price in Hong Kong, the population in Hong Kong had spent more on food, accounted for about 11.0% of total GDP in 2014. As the CPI for food remained on the upward trend, some households or individuals may consider dining out instead of cooking by their own which is expected to give a push to the growth of catering industry in terms of both the number of customers and revenue. Catering industry in Hong Kong The major types of restaurants in the catering industry in Hong Kong include both Hong Kong style cafes and Chinese restaurants which have the largest number of counts in Hong Kong, with over 2,500 and 2,300 establishments respectively. While for full-service Chinese restaurants, most of them serve Cantonese cuisine, followed by Beijing, Sichuan and Shanghai cuisines. For non-Chinese restaurants, Western and Japanese restaurants contribute the largest number, while Korean, Thai and Vietnamese restaurants also attribute to a significant number in Hong Kong. Hong Kong’s full-service Cantonese restaurant market Recent development Cantonese restaurants serve tea, dim sum and simple Cantonese dishes during the day.