US Stock IPO Outlook | Hong Kong Event Service Provider BUUU Group: Industry Booming, Cash Flow Declining Year by Year

Hong Kong, as a preferred destination for international gatherings, has always been favored by various types of exhibitions.

For example, the Tatler Gen.T Summit in September 2023, the WOW Summit in March 2023, as well as the Hong Kong Jewellery & Gem World, the Asia Fruit Logistica, and the Asia Aerospace Expo in 2023... These events not only highlight Hong Kong's resilience and adaptability in the exhibition industry but also demonstrate its capability to host diverse and large-scale events.

Against this backdrop, Hong Kong event service provider BUUU Group is also seizing the opportunity, planning to make a push for an IPO in the US stock market.

According to Zhitong Finance APP, BUUU Group recently submitted its initial public offering application to the U.S. Securities and Exchange Commission, aiming to raise up to $8 million. The company plans to issue 1.5 million shares at a price range of $4 to $6 per share. If calculated at the midpoint of the proposed range, BUUU Group's market capitalization will reach approximately $83 million.

The company plans to use the net proceeds from this offering for—approximately 25% to enhance brand recognition and strengthen marketing initiatives; about 25% to expand service scope and broaden market influence; around 20% to integrate advanced technology into the company's events; about 20% to expand into the U.S. and Southeast Asia; and the remaining approximately 10% for other general corporate purposes.

However, it is important to note that behind BUUU Group's IPO in the U.S. lies the company's gradually emerging "cash flow difficulties."

Revenue and Net Profit Both Increase, but Cash Flow Decreases Year by Year

It is reported that BUUU Group was established in 2017, primarily providing meeting, incentive travel, large conference, and exhibition (MICE) solutions for various clients, including public institutions, marketing and public relations companies, real estate companies, and numerous well-known brands. Its core business includes event management and stage production.

In recent years, benefiting from the booming exhibition industry in Hong Kong, BUUU Group has seen rapid growth in both revenue and net profit.

According to the data disclosed in the prospectus, as of June 30, 2023, and for the fiscal year ending June 30, 2024, the company achieved revenues of $3.539 million and $5.812 million, respectively, a year-on-year increase of 64.2%; net profits were $330,500 and $880,200, respectively, a year-on-year increase of 166.3%, with core financial indicators maintaining a good growth trend.

From the revenue structure, event management services are the company's largest business segment, recording revenues of $2.5545 million and $4.6816 million during the period, with the revenue share increasing from 72.2% in the 2023 fiscal year to 80.5%; stage production is the company's second-largest business segment, achieving revenues of $984,500 and $1.1306 million during the period, with the revenue share decreasing from 27.8% in the 2023 fiscal year to 19.5%.

However, even though BUUU Group's revenue and net profit, the two core financial indicators, show good growth, the cash flow structure indicates that the company may be experiencing some cash flow tension.

According to the data disclosed in the prospectus, for the fiscal year ending June 30, 2024, the net cash inflow from operating activities was $87,200, a significant decrease from $143,000 in the 2023 fiscal year At the same time, the company's year-end cash and cash equivalents decreased from USD 515,000 in the 2023 fiscal year to USD 447,900, showing a "small but declining" cash scale.

In this regard, BUUU Group also explained in its prospectus that the difference between the company's net profit and the net cash inflow from operating activities is due to adjustments for non-cash items, totaling USD 116,500, with a total cash used in operating assets and liabilities of USD 904,600.

Among them, the adjustments for non-cash items include depreciation of real estate, plants, and equipment, rental expenses for office premises and warehouses in Hong Kong, financing costs related to finance leases, and interest expenses on bank loans. The cash used in operating assets and liabilities is mainly attributed to an increase in trade receivables of USD 655,700, an increase in deposits and prepayments of USD 130,400, an increase in income tax payable of USD 129,500, and an increase in amounts payable to related parties of USD 330,500.

From the above, it can be seen that although BUUU Group's revenue and net profit have maintained rapid growth, adjustments for some non-cash items and increases in trade receivables, deposits, and prepayments have still had a certain impact on the company's cash flow, which indirectly reveals the "bitterness" of small event service providers.

The industry is thriving, but enhancing competitiveness remains key

Hong Kong is globally recognized as one of the most important destinations for exhibitions and conventions due to its strategic location, advanced infrastructure, and strong connectivity. It was named "Asia's Best Conference City" by Smart Travel Asia in 2020 and was awarded "Most Anticipated Overseas Conference and Incentive Destination" by the China Tourism Industry Awards in 2022.

According to data from the Hong Kong Tourism Board, in 2023, Hong Kong hosted 125 large-scale exhibitions, an increase of 30% compared to 2022. These events attracted over 1.3 million overseas visitors, highlighting Hong Kong's appeal as a premier exhibition destination. Additionally, in the first half of 2024, the Tourism Board reported over 60 world-class exhibition events held in key sectors such as aviation, education, construction, medicine, innovative technology, and financial services.

(Data source: BUUU Group prospectus)

With such growth momentum, the exhibition industry in Hong Kong is also full of potential. According to GIH, the global exhibition market is expected to reach approximately USD 17.8 trillion by 2030, with a compound annual growth rate (CAGR) of 7.5%. As a leading hub, Hong Kong is expected to capture a significant share of this growth due to its strategic advantages, world-class facilities, and ongoing investments in digital and transportation infrastructure.

However, as a small event service provider, BUUU Group faces intense competition—Hong Kong's exhibition industry is highly competitive, with a wide variety of service providers, including event organizers, booth builders, insurance companies, freight forwarders, travel agencies, and hotels. Event organizers typically provide comprehensive solutions, including conference planning, exhibition management, and integrated services The presence of leading international and regional participants, coupled with high market competition, has intensified the competitive pressure on BUUU Group to some extent.

In response to the aforementioned competitive pressure, BUUU Group stated in its IPO plan that the company is seeking to further expand its business through the capital market to enhance its competitiveness in event management and stage production. With the recovery and growth of the global events industry, the company is expected to leverage its professional services and innovative solutions to meet the growing market demand for high-quality event experiences.

In summary, from the perspective of industry development prospects, BUUU Group is situated in an industry characterized by both "opportunities and challenges." Against this backdrop, for it to further enhance its core competitiveness amid tight cash flow, seeking external funding is undoubtedly a wise choice, but whether investors will be willing to buy into the company's "event services story" remains a significant unknown