Hephaestus Holdings Limited — M&A Activity 2016

Jun 30, 2016

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

UNION ASIA ENTERPRISE HOLDINGS LTD

萬亞企業控股有限公司

(Formerly known as Pan Asia Mining Limited)

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 8173)

PROFIT FORECAST IN RELATION TO THE DISCLOSEABLE TRANSACTION

Reference is made to the announcement (the "Announcement") of Union Asia Enterprise Holdings Limited (the "Company") dated 10 June 2016 in relation to, among others, the acquisition of the entire issued share capital of the Target. Unless the context otherwise requires, terms used in this announcement shall have the same meanings as defined in the Announcement.

PROFIT FORECAST

As set out in the Announcement, the Consideration was arrived after taking into account of, among other things, the preliminary valuation of 100% equity interest in the Target of approximately HK$14,000,000 (the "Valuation") as at the valuation date of 31 March 2016 prepared by an independent professional valuer, Roma Appraisals Limited ("Roma"). The Valuation has adopted the discounted cash flow method under the income approach in valuing the Target. Therefore, the Valuation is regarded as a profit forecast under Rule 19.61 of the GEM Listing Rules. This announcement is made in compliance with Rules 19.60A and 19.62 of the GEM Listing Rules.

Pursuant to Rule 19.62(1) of the GEM Listing Rules, the following are the details of the principal assumptions, including commercial assumptions, upon which the report for the Valuation was based:

1. The Valuation was mainly based on the projections of the future cash flows as provided by the management of the Target. It was assumed that the projections outlined in the financial information provided are reasonable, reflecting market conditions and economic fundamentals and will materialize;
2. According to the financial forecast, the covered a period was approximately 5 years. Terminal growth rate of 3% was adopted based on Hong Kong's long term projected inflation as sourced from International Monetary Fund;

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1. The Valuation was performed based on the audited 2015 and 2016 financial statements of the Target;

2. Compared to similar interest in public companies, ownership interest is not readily marketable for private companies. Hence, a marketability discount of 16.11% was applied to the valuation result. The marketability discount was adopted by making reference to the study in the FMV Restricted Stock Study Companion Guide published by FMV Opinions, Inc. in 2016;

3. Discount rate of 15.80% was adopted, which was the estimated weighted average cost of capital of the Target with reference to comparable companies engaged in similar businesses;

4. Working capital projection was estimated by the management with reference to average historical working capital turnover days of the Target in 2015 and 2016;

5. All relevant legal approvals and business certificates or licenses to operate the business in the localities in which the Target operates or intends to operate would be officially obtained and renewable upon expiry;

6. There will be sufficient supply of technical staff in the industry in which the Target operates, and the Target will retain competent management, key personnel and technical staff to support its ongoing operations and developments;

7. There will be no major change in the current taxation laws in the localities in which the Target operates or intends to operate and that the rates of tax payable and corporate tax rate shall remain unchanged and that all applicable laws and regulations will be complied with;

8. There will be no major change in the political, legal, economic or financial conditions in the localities in which the Target operates or intends to operate, which would adversely affect the revenues attributable to and profitability of the Target; and

9. Interest rates and exchange rates in the localities for the operation of the Target will not differ materially from those presently prevailing.

The reporting accountant of the Company, Elite Partners CPA Limited ("Elite"), has examined and reported on the calculations of the discounted future estimated cash flows on which the Valuation is based.

Akron Corporate Finance Limited ("Akron"), the financial adviser in connection with the profit forecast in respect of the Valuation, has confirmed that the Valuation has been made after due and careful enquiry by the Board.

A letter from each of Elite and Akron has been submitted to the Stock Exchange, and is included in the Appendix I and II respectively to this announcement pursuant to Rules 19.62(2) and 19.62(3) of the GEM Listing Rules.

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The following are the qualifications of each expert who has provided its conclusion or advice, which is contained in this announcement:

Name	Qualification
Elite Partners CPA Limited	Certified Public Accountants
Roma Appraisals Limited	Independent professional valuer
Akron Corporate Finance Limited	A licenced corporation to carry on Type 6 (advising on corporate finance) regulated activity as defined under the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)

As at the date of this announcement, each of Elite, Roma and Akron does not have any shareholding, directly or indirectly, in any member of the Group or any right (whether legally enforceable or not) to subscribe for or to nominate person(s) to subscribe for the securities in any member of the Group.

Each of Elite, Roma and Akron has given and has not withdrawn its consent to the publication of this announcement with inclusion of its report and all references to its name in the form and context in which it respectively appears in this announcement.

By order of the Board
Union Asia Enterprise Holdings Limited
Yip Man Yi
Chairman

Hong Kong, 30 June 2016

As at the date of this announcement, the Board comprises two executive Directors, Ms. Yip Man Yi and Mr. Shiu Chi Tak, Titus, two non-executive Directors, Mr. Liang Tongwei and Mr. Wong Chi Man, and six independent non-executive Directors, Mr. Chu Hung Lin, Victor, Mr. Tong Wan Sze, Mr. Fung Kwok Leung, Dr. Wan Ho Yuen, Terence, Mr. Li Kwok Chu and Mr. Lau Shu Yan.

This announcement, for which the Directors jointly and individually accept full responsibility, including the particulars given in compliance with the GEM Listing Rules for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief, the information in this announcement is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this announcement misleading.

This announcement will remain on the page of "Latest Company Announcement" on the GEM website for at least 7 days from the date of its posting and on the website of the Company www.unionasiahk.com.

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APPENDIX I – LETTER FROM ELITE

The following is the text of a report received from Elite Partners CPA Limited, Certified Public Accountants, Hong Kong, the independent reporting accountants of the Company for the purpose of inclusion in this announcement.

開元信德會計師事務所有限公司
ELITE PARTNERS CPA LIMITED
Certified Public Accountants

The Board of Directors
Union Asia Enterprise Holdings Limited
Units 3404-6, 34/F
AIA Tower
183 Electric Road
North Point, Hong Kong

30 June 2016

Dear Sirs,

We have examined the calculations of the discounted future estimated cash flows (the “Profit Forecast”) on which the valuation prepared by Roma Appraisals Limited dated on 9 June 2016 in respect of fair value of 100% of equity interest in Fu Hang Metal (Asia) Limited (the “Target Company”) as at 31 March 2016. The Profit Forecast is regarded by The Stock Exchange of Hong Kong Limited as a profit forecast under paragraph 19.61 of GEM Listing Rules.

Respective responsibilities of the directors of the Company and the reporting accountants

It is the responsibility solely of the directors of the Company to prepare the Profit Forecast. The Profit Forecast has been prepared using a set of assumptions (the “Assumptions”), the completeness, reasonableness and validity of which are the sole responsibility of the directors of the Company.

It is our responsibility to draw a conclusion, based on our work on the arithmetical accuracy of the calculations of the Profit Forecast and to present our conclusion solely to you, as a body, for the purpose of reporting under paragraph 19.62(2) of the GEM Listing Rules and for no other purpose. We are not reporting on the appropriateness and validity of the bases and Assumptions on which the Profit Forecast are based and our work does not constitute any valuation of the Target Company. The Profit Forecast does not involve the adoption of accounting policies. The Assumptions used in the preparation of the Profit Forecast include hypothetical assumptions about future events and management actions that may or may not occur. Even if the events and actions anticipated do occur, actual results are still likely to be different from the Profit Forecast and the variation may be material. We have not reviewed, considered or conducted any work on the completeness, reasonableness and the validity of the Assumptions and thus express no opinion whatsoever thereon. Our work is more limited than that for a reasonable assurance engagement, and therefore less assurance is obtained than in a reasonable assurance engagement. We also accept no responsibility to any other person in respect of, arising out of, or in connection with our work.

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Basis of opinion

We carried out our work in accordance with Hong Kong Standard on Investment Circular Reporting Engagements 500 “Reporting on Profit Forecasts, Statements of Sufficiency of Working Capital and Statements of Indebtedness” and with reference to Hong Kong Standard on Assurance Engagements 3000 “Assurance Engagements Other Than Audits or Reviews of Historical Financial Information” issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”). Those standards require that we plan and perform our work to obtain reasonable assurance as to whether, so far as the accounting policies and calculations are concerned, the directors of the Company have properly compiled the Profit Forecast in accordance with the assumptions made by the directors and as to whether the Profit Forecast is presented on a basis consistent in all material respects with the accounting policies normally adopted by the Company. Our work is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing issued by the HKICPA. Accordingly, we do not express an audit opinion.

Opinion

In our opinion, so far as the accounting policies and calculations are concerned, the Profit Forecast has been properly compiled in accordance with the bases and assumptions adopted by the directors of the Company.

Yours faithfully

Elite Partners CPA Limited
Certified Public Accountants
Hong Kong

Yip Kai Yin
Practising Certificate Number: P05131

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APPENDIX II – LETTER FROM AKRON

The following is the text of a report received from Akron Corporate Finance Limited, the financial adviser to the Company, for the purpose of inclusion in this announcement.

Corporate Finance Limited
亚貝隆资本有限公司

The Board of Directors
Union Asia Enterprise Holdings Limited
Units 3404-6, 34/F
AIA Tower
183 Electric Road
North Point, Hong Kong

30 June 2016

Dear Sirs,

We refer to the announcements of Union Asia Enterprise Holdings Limited (the “Company”) dated 10 June 2016 and 30 June 2016 in relation to the Acquisition which constitutes a discloseable transaction under the GEM Listing Rules (the “Announcements”) and also the valuation report dated 9 June 2016 prepared by Roma Appraisals Limited, the independent valuer of the Company (the “Independent Valuer”), in respect of valuation of 100% equity interest in Target (the “Valuation”), the Valuation of which constitutes a profit forecast (the “Forecast”) under Rule 19.61 of the GEM Listing Rules. Unless otherwise defined or if the context otherwise requires, all terms defined in the Announcements shall have the same meaning when used in this letter.

Akron Corporate Finance Limited (“ACF”) hereby confirms that it has reviewed and discussed with the Company, the bases and assumptions adopted in the Valuation which contained the Forecast, and has satisfied itself that the bases and assumptions upon which the Valuation is based have been made with due care and objectivity, and on a reasonable basis and that the Forecast has been made by the Directors after due and careful enquiry.

We have not independently verified the computations leading to the Independent Valuer’s determination of the fair value and market value of the Target. We have had no role or involvement and have not provided and will not provide any assessment of the fair value and market value of the Target. Accordingly, save as expressly stated in this letter, we take no responsibility for and express no views, whether expressly or implicitly, on the fair value and market value of the Target as determined by the Independent Valuer and set out in the valuation report issued by the Independent Valuer or otherwise.

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ACF further confirms that the assessment, review and discussion carried out by it as described above are primarily based on financial, economic, market and other conditions in effect, and the information made available to us as of the date of this letter and that it has, in arriving at its views, relied on information and materials supplied to it by the Independent Valuer, the Group and the Target and opinions expressed by, and representations of, the employees and/or management of the Independent Valuer, the Group and the Target. We have assumed that all information, materials and representations so supplied, including all information, materials and representations referred to or contained in the Announcements, for which the Directors are wholly responsible, were true, accurate, complete and not misleading at the time they were supplied or made, and remained so up to the date of the Announcements and that no material fact or information has been omitted from the information and materials supplied. No representation or warranty, expressed or implied, is made by ACF on the accuracy, truth or completeness of such information, materials, opinions and/or representations. Circumstances could have developed or could develop in the future that, if known to ACF at the time of this letter, would have altered our respective assessment and review. Further, while the qualifications, bases and assumptions adopted by the Independent Valuer are considered by us to be reasonable, they are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the control of the Company and the Independent Valuer.

ACF is acting as financial adviser to the Company in reviewing the Forecast and will receive fees for such advice. ACF and its directors and affiliates will, neither jointly or severally, be responsible to anyone other than the Company for providing advice in connection with the review of the Forecast, nor will ACF, its directors or affiliates, whether jointly or severally, owe any responsibility to anyone other than the Company.

Nothing in this letter should be construed as an opinion or view as to the fair value, market value or any other value of the Target or as an opinion or recommendation to any person as to whether they should acquire Shares. Shareholders are recommended to read the Announcements with care.

A copy of this letter in its entirety may be reproduced in the announcement of the Company dated 30 June 2016 on the basis that none of the Company, the Independent Valuer or any other person may reproduce, disseminate or quote this letter (or any part thereof) for any other purpose at any time and in any manner without our prior written consent. In the event of inconsistency, the English text of this letter shall prevail over the Chinese translation of this letter.

Yours faithfully,

Akron Corporate Finance Limited

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