WEB NEWS IPO Activity
China Dredging Group plans for Initial Public Offering (Company previously entered into a reverse merger transaction with a private shell).
Company Snapshot :
One of the leading privately-owned dredging companies in the PRC
Industry Snapshot (Per Filing)
Dredging involves the removal of sediments from harbors, lakes, rivers and water treatment settling ponds to permit the passage of ships and barges, to increase the capacity of water storage reservoirs, to improve waterways and to build and maintain usable shore land. According to the International Association of Dredging Companies, or IADC, an industry association, the global dredging market was approximately $15.2 billion in 2009, representing a 7% increase from 2008 levels, and the Chinese dredging market was approximately $3.5 billion in 2009, representing a six-fold increase since 2000 and 23.0% of the global market in 2009.
The dredging industry is significant for the PRC, a country with a long coastline, abundant marine resources, and strong and growing international trade activity. China’s growth in international trade, especially, has lead to sustained increases in the shipping of goods and the use of larger vessels to transport such goods. Increased shipping activity and the use of larger vessels necessitates deeper and wider waterways, giving rise to the need for more capital and maintenance dredging.
The PRC’s Ministry of Construction and its Ministry of Foreign Trade and Economic Cooperation jointly issued Decree No. 113: The Regulations on Administration of Foreign Investment Construction Enterprises, which substantially limits international dredging companies from entering the PRC market and effectively closes the market to international tenders. We believe that this regulation substantially benefits us by limiting our competition primarily to small companies in the highly fragmented PRC industry for dredging specialty contracting.
Use Of proceeds:
We anticipate using the net proceeds we receive in this offering, assuming they are sufficient, as follows:
adding to our dredging fleet one or two non-self-propelled cutter suction dredgers with capacity above 3,000 m3/h; and
purchasing the auxiliary ships, pipes, and other equipments. Underwriter:
UnderWriters:
Chardan Capital Markets, LLC
Proposed offering price : TBD
Post IPO Share Calculation : TBD
Financial Snapshot : December Year End
Statement of Operations Data
For the
2009
2010
(Audited)
(Audited)
(Audited)
Contract revenue
$
54,480,271
$
80,333,891
$
131,405,665
Cost of contract revenue
(25,424,227
)
(38,715,490
)
(58,723,528
)
Gross profit
29,056,044
41,618,401
72,682,137
General and administrative expenses
(2,152,575
)
(2,531,132
)
(7,159,793
)
Income from operations
26,903,469
39,087,269
65,522,344
Other (expense) income
(136,332
)
(726,020
)
(720,370
)
Income before income taxes
26,767,137
38,361,249
64,801,974
Income tax expense
(6,696,745
)
(9,596,651
)
(16,556,396
)
Net income
$
20,070,392
$
28,764,598
$
48,245,578
Deemed dividend on Class A Preferred Shares
—
—
(11,977,712
)
Net income attributable to ordinary shareholders
$
20,070,392
$
28,764,598
$
36,267,866
Earnings per share
Earnings per ordinary share
– Basic
$
0.38
(1)
$
0.55
(1)
$
0.69
– Diluted
$
0.38
(1)
$
0.55
(1)
$
0.69
Weighted average number of ordinary shares outstanding
– Basic
52,177,323
52,173,323
52,264,994
– Diluted
52,177,323
52,177,323
52,264,994
Pro Forma Valuation : TBD
Liquidity Requirements
We intend to use the proceeds from our 2010 Private Placement and any additional proceeds from our expected public offering to finance our plan to further expand our fleet. In the event that we are unable to fund our planned fleet expansion in a timely manner, we intend to use cash generated from operating activities and to pursue alternative sources of financing, such as loan facilities from financial institutions, to meet our cash needs in relation to the expansion plan.
We anticipate significant future uses of cash for the acquisition of additional dredgers, as we replace leased dredgers with our own dredgers and we expand our operations. We plan meet these cash needs using our cash on hand, cash generated by operations and the proceeds of our public offering.
Deal Flow
NEW YORK, NY - 12/28/2010 -- China Dredging Group Company Ltd is pleased to announce that on December 21, 2010, it closed its final round of private placement funding. The aggregate gross proceeds from the financing totaled $50,064,935. A total of 10,012,987 Investors Class A Convertible Preferred Shares was issued and sold at a price of $5.00 per Preferred Share.
Previously, on October 27, 2010, China Dredging merged with CAC, a US-public-reporting shell company, also domiciled in the BVI. Following the merger, China Dredging is the surviving corporation and its management continues in place without change following the transaction.
Mr. Zhuo Xinrong, Chairman and CEO of China Dredging stated, "This merger and subsequent financings are important and exciting steps for China Dredging. We expect that our new public status will quickly lead to increased access to capital, and recognition and stature for the Company in both Chinese and international markets. The additional equity capital from this round will allow us to meet our objectives of rapidly growing our dredging fleet and capability to provide key services essential to the development and maintenance of marine infrastructure. While the dredging industry worldwide is often characterized as being mature, the industry in China as bolstered by P.R.C. mandates and urban coastal migration is still growing quickly and we are well positioned to benefit from this growth in the coming years."
Form 10 RTO
China Dredging Group Co., Ltd. plans to go public. In October 2010, the company merged with a public reporting, non-trading shell company.
Company Snapshot:
Lleading privately-owned dredging companies in the PRC.
Post Merger Share Calculation :
52,177,323: Pre reverse merger outstanding shares
500,000: Newly issued shares of Common Stock
4,371,000: Shares from warrants associated with private placement
GeoTeam® best effort calculation of total post reverse merger shares assuming full conversions: 57,048,323
Financial Snapshot:
Contract revenue increased by $5,156,180, or 12.63%, to $45,981,433 for the six months ended on June 30, 2010, compared to the same period in 2009. The primary reason for this increase was the full utilization of five dredgers during the entire period and the continuation into 2010 of four projects unfinished at the end of 2009. The carryover of projects permitted the Group to operate with less downtime than it experienced during the six months ended June 30, 2009.
Due primarily to the increase in contract revenue and the stable operating income margin as a whole, net income for the six months ended June 30, 2010 increased by $1,754,131, or 11.47%, to $17,041,666, compared to $15,287,535 for the six months ended June 30, 2009.
Financial Target Agreements
On October 29, 2010, our controlling shareholder, a company controlled by Mr. Xinrong Zhuo, placed into escrow 15,000,000 of our ordinary shares (the “Make-Good Escrow ”) pursuant to a securities escrow agreement. If we miss the earnings targets set forth below, holders of the Preferred Share will receive additional shares from the Make-Good Escrow, up to the full number of shares held in the Make-Good Escrow.
Adjusted Net Income target
2010: $48,142,735 $ 87,043,678
