Tailam Tech Construction Sells 5% Stake in Zhejiang Erg Technology for RMB 17.15 Million

Key Points for Investors

• Disposal Transaction: Tailam Tech Construction Holdings Limited, via its indirect wholly-owned subsidiary Shanghai Yuanxintai Investment Management Co., Ltd, has agreed to sell its entire 5% equity stake (3,021,500 shares) in Zhejiang Erg Technology Joint Stock Co., Ltd. for RMB 17,148,875.07 (approximately HK\$18,863,762.58) to Mr. Li Xiantai and Ms. Li Xiujuan.
• Transaction Completion: The sale will be completed on or before 30 June 2026. After completion, Tailam Tech will no longer hold any interest in the Target Company.
• Nature of Transaction: This disposal constitutes a discloseable transaction under Chapter 14 of the Listing Rules as the applicable percentage ratios exceed 5% but are less than 25%.
• Financial Impact: The Group is expected to realize an unaudited gain of approximately RMB 1.1 million from this transaction. The actual gain or loss may be subject to auditor review.

Details of the Disposal

The transaction was executed following arm’s length negotiations, with the consideration based on an earlier agreed put option arrangement. When Tailam Tech acquired the shares in January 2024 for RMB 15,107,500, it secured a put option allowing it to sell the stake back at cost plus a 6% annualized interest. The current consideration equals the amount payable under this exit mechanism, reflecting about RMB 2,041,375 in annualized return since January 2024.

The price per Target Share is approximately RMB 5.68, compared to RMB 5.00 per share at acquisition. The price-to-book (P/B) ratio at disposal is about 2.17 (vs. 1.88 at acquisition), and the price-earnings (P/E) ratio is approximately 23.19 (vs. 27.78 at acquisition). These ratios were considered in determining a fair valuation, especially since the Target Company has been delisted from the NEEQ since December 2023 and lacks an open market for its shares.

Background on the Target Company

Zhejiang Erg Technology is a joint stock limited company in the PRC, previously quoted on the NEEQ (stock code: 832208) and voluntarily delisted in December 2023 for strategic and cost reasons. Its main business is the R&D, production, and sales of cooling systems for renewable energy power generation and related devices.

Recent Financial Performance:

• 2024 (audited): Net profit after tax: RMB 4,393,970.57
• 2025 (unaudited): Net profit after tax: RMB 14,787,783.95
• As of 31 Dec 2025 (unaudited): Total assets: RMB 625,356,099.14; Net assets: RMB 157,741,950.32

Strategic Rationale and Implications for Shareholders

Since the acquisition, Tailam Tech has closely monitored the Target Company’s business for potential synergies. However, the board concluded that strategic benefits were limited due to the small stake (5%) and lack of significant influence over management or business strategy, including dividend policy.

The absence of an open market for the Target Shares and limited operational influence prompted Tailam Tech to pursue an exit. The transaction enables the company to realize its investment with a positive return, replenish liquidity, and position itself for new business and acquisition opportunities—an especially prudent move amid ongoing macroeconomic and industry uncertainties.

The directors (including independent non-executive directors) unanimously consider the terms of the disposal fair and reasonable, in the company’s and shareholders’ best interests.

About the Parties Involved

• Tailam Tech Construction Holdings Limited: A Cayman Islands-incorporated company listed on the Main Board of the Hong Kong Stock Exchange, mainly engaged in the manufacturing and sale of PHC piles, commercial concrete, and ceramsite concrete block in China.
• Vendor: Shanghai Yuanxintai Investment Management Co., Ltd, an indirect wholly-owned subsidiary of Tailam Tech, focused on investment and management services.
• Purchasers: Mr. Li Xiantai and Ms. Li Xiujuan (his spouse), who, together with their son, are the ultimate beneficial owners of Zhejiang Erg Technology. They are independent third parties with no connection to Tailam Tech or its connected persons.

Potential Share Price Sensitivity

• Unlocking Value and Liquidity: The disposal provides Tailam Tech with a cash inflow and a realized gain, improving the company’s liquidity and capital allocation flexibility.
• Strategic Refocus: Exiting a non-core, minority investment with limited influence may allow the company to focus on higher impact growth opportunities and acquisitions, potentially enhancing shareholder value.
• Transparent Exit Terms: The exit at a predetermined annualized return removes uncertainty regarding the unlisted investment, which may be viewed positively by investors seeking clarity in the company’s asset portfolio.

Conclusion

The disposal of the 5% stake in Zhejiang Erg Technology is a strategic move that strengthens Tailam Tech Construction’s financial position and aligns with prudent capital management. Investors should watch for how the company deploys the freed-up capital, as it may support future growth initiatives or acquisitions.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Investors should conduct their own due diligence and consult with professional advisors before making investment decisions. The information is based on company disclosures and may be subject to change.

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