Winning Tower Group Holdings Limited

Important note on presentation. Winning Tower uses a nature-of-expense income statement. It does not report gross profit, operating income or EBITDA as such.

• "Gross profit" is revenue less cost of inventories consumed.

• "Operating profit" is the Company's "profit/(loss) before tax from operations".

• "EBITDA" is operating profit plus depreciation. FY2021 and FY2022 EBITDA include impairment charges.

TipRanks reports different gross profit figures using an aggregator definition: 39.75 (FY2021), 10.97 (FY2022), 19.53 (FY2023) and 39.20 (FY2024). Those figures are not used.

Income statement

Sources: - FY2022–FY2025 line items: FY2023, FY2024 and FY2025 results announcements.

• FY2021 revenue, operating loss and attributable loss: 1 Feb 2024 joint announcement.

• FY2021 profit before tax, depreciation and EBITDA: TipRanks (aggregator).

• FY2020 YoY base: TipRanks (FY2020 revenue HK$76.81M).

• FY2021 EPS is computed from the attributable loss over 1,400M shares.

Margins (%)

Revenue CAGR. FY2021 to FY2025 revenue grew at a compound annual rate of about 9.4%, computed from filings. Stockopedia shows 9.88% as an average.

Commentary.

Trough and recovery: FY2021 was the trough, with heavy restaurant losses and impairments during COVID. Recovery from FY2022 to FY2024 came from three sources:

• airline catering volumes normalising (FY2023 revenue +16.2%);

• depreciation falling from HK$12.7M to HK$6.9M as impaired and closed restaurant assets rolled off;

• headcount reductions (94 to 73 employees in FY2024).

FY2024 profit quality: FY2024's first profit was helped by closing loss-making food shops and by a HK$2.45M one-off loan waiver. Without the waiver, FY2024 would have shown a pre-tax loss of about HK$1.0M.

FY2025 margin squeeze: FY2025 showed volume-led growth (+13.4%) but margin dilution. Food cost rose 24.7% against revenue growth of 13.4%, compressing the gross margin by 5.7 percentage points to 37.4%. Part of this is mix: the shift away from restaurants, which carry low food cost relative to sales, toward lower-margin wholesale. Part is raw-material inflation.

Below-the-line: Other income fell from HK$3.7M to HK$0.6M, mainly because the HK$2.45M waiver did not recur. The result was a HK$2.0M net loss. Comprehensive loss was much larger at HK$8.5M because of a HK$7.7M revaluation deficit on owned property.

Interim trend

Sources: 2023 interim announcement (1H2022 and 1H2023 profit before tax shown as proxy: -5.876 and -3.197); S&P Capital IQ via MarketScreener for 1H2025 and 1H2026 net income. 2Q2026 revenue was HK$34.23M against HK$27.03M in 2Q2025, which implies 1Q2026 revenue of about HK$40.7M.

Trailing twelve months to June 2026. Revenue was about HK$142.85M: FY2025's 123.03, less 1H2025's 55.11, plus 1H2026's 74.93. Net income attributable was about HK$2.25M. Both match Yahoo Finance TTM figures of HK$142.85M and HK$2.24M. This is a material inflection: annualised revenue is now about 16% above FY2025 and the Group is profitable on a TTM basis.

Balance sheet

Sources: 1 Feb 2024 joint announcement (FY2021, FY2022 totals); 2023 interim (Dec 2022 detail); FY2023, FY2024 and FY2025 results and 2024 AR. FY2021 total equity is computed as total assets less total liabilities. MarketScreener shows net debt of -3.59 (FY2024) and -5.02 (FY2025); the FY2024 difference reflects definitional differences.

Balance sheet commentary. The balance sheet is asset-heavy and essentially debt-free.

• Owned leasehold land and buildings, carried at fair value and pledged, had a carrying value of HK$47.2M at end-FY2025 (HK$55.6M a year earlier). At end-FY2024, owned buildings were HK$23.7M and leasehold land HK$48.3M (2024 AR key audit matter).

• The only bank debt is a prime-linked mortgage loan of HK$1.8M at prime minus 3.00%, maturing 2027–2030.

• Equity attributable has fallen from HK$106.9M to HK$82.2M over four years. Losses drove most of this, and the FY2025 revaluation deficit added HK$6.5M net of tax.

• The negative NCI balance (−HK$2.5M) reflects accumulated losses in partly-owned restaurant JVs.

• Lease liabilities more than doubled in FY2025 (HK$4.2M to HK$9.8M), consistent with the Riley House lease renewal (to 2028) and a restaurant lease.

Cash flow

Capex is taken from segment "additions of PPE". No dividends or repurchases occurred in FY2024 or FY2025 per the Directors' Report and the FY2025 results. Cash rose HK$3.5M in FY2025 despite the net loss, which implies positive operating cash flow after HK$6.9M of non-cash depreciation, lease payments and working-capital movements. Payables rose HK$7.2M while receivables rose HK$3.2M.

Ratios

All ratios are analyst calculations from FY2024 and FY2025 filings. The reported gearing ratio is the Company's definition: bank borrowings over equity attributable.

Working-capital note. The cash conversion cycle shortened sharply in FY2025, from 44 to 21 days, because trade payables nearly tripled from HK$3.9M to HK$11.0M. HK$3.8M of payables were aged one to two months at year-end, against none a year earlier. This flattered year-end cash. Monitor whether the stretch reverses in 2026.

Guidance and consensus

Management provides no numeric guidance. Its outlook language is qualitative: maintain customers, explore opportunities, expand refrigeration capacity and study acquisitions. There is no sell-side consensus, with zero covering analysts.

The best available run-rate indicator is 1H2026. Revenue of HK$74.9M (+36%) and net income of HK$2.0M imply that FY2026 could be the Group's first meaningful profit year since before COVID, if 2H2026 holds the 1H trend. This is an observation, not a forecast.

Bull case

1. Operating leverage is showing. 1H2026 revenue rose HK$19.8M year on year and net profit swung by HK$4.4M. On a largely fixed cost base (depreciation about HK$6.9M; labour about HK$25M), incremental volume drops through at high rates.

2. Asset backing caps downside. The shares trade below book (about 0.92x P/B). Net cash ex-leases is HK$14.9M, and HK$47M of owned property has negligible debt against it.

3. Strategic sponsor. The Zhong family paid an implied HK$72.8M for the Company in 2024, near today's HK$75.6M market capitalisation. Its frozen-food sourcing and processing network in Guangzhou could lower input costs or add volume.

Bear case

1. Concentration. One unnamed customer accounts for 37.5% of revenue. Losing it, or having it insource, would eliminate most of the Group's gross profit.

2. Margin structure is deteriorating. Gross margin after food cost fell 9.6 percentage points over three years. The core processing segment is loss-making at segment level, so revenue growth has not translated into durable profit.

3. Minority-shareholder risks. A 70% controller, a dense web of connected transactions, a 2024 dealing breach, and extreme illiquidity (zero volume on some days) limit both value realisation and governance protection.

Catalysts and monitorables (next 12 months)

Analyst verdict

Winning Tower is a structurally small, operationally competent Hong Kong food-service processor that has finally begun to grow into its fixed cost base. The FY2021–FY2025 record is sobering: cumulative attributable losses of about HK$37.8M and a 23% erosion of shareholders' equity. Gross margins also fell as the mix shifted from restaurants toward lower-margin wholesale and as meat costs rose. FY2025's 13.4% revenue growth produced a net loss, showing that volume alone was not enough.

1H2026 changes the conversation. Revenue up 36%, a swing to HK$2.0M of net income and a profitable TTM suggest the airline-catering-led volume recovery has crossed the breakeven threshold. The balance sheet gives real protection: net cash, minimal bank debt and owned industrial property that alone represents most of the market capitalisation.

Two factors prevent a stronger view. The first is concentration. A single unnamed customer drives more than a third of revenue, and the top five drove two-thirds in FY2024, giving buyers decisive pricing power and making earnings fragile. The second is the governance and liquidity profile. The Zhong family's 70% stake, layered connected transactions on supply and premises, a 2024 dealing-rule breach and days of zero turnover mean public minority holders have limited influence and limited exit. The 2024 transaction price of HK$0.052 has acted as a de facto anchor, and the stock trades near it today.

The key test is FY2026. A full year of profit with stabilising gross margins would validate the inflection. Renewed margin compression or any wobble in the Customer A relationship would return the investment case to an asset-value-only argument, discounted for governance.

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Principal sources

• Winning Tower Group Holdings Ltd, Annual Results Announcement FY2025 (HKEX, 19 March 2026)

• Winning Tower, 2024 Annual Report (HKEX, 1 April 2025), including Directors' Report, Corporate Governance Report, ESG Report and auditor's report

• Winning Tower, FY2024 results announcement (20 March 2025); positive profit alert (14 March 2025)

• Winning Tower, FY2023 results announcement (27 March 2024); 2023 first-quarter and interim announcements

• Joint Announcement on SPA completion and mandatory unconditional cash offer (1 February 2024); offer-close announcement (6 May 2024); composite document (15 April 2024)

• Continuing connected transaction announcements (30 December 2022; 29 December 2023; 30 December 2025 via S&P Capital IQ)

• Winning Tower 2025 Interim Report (25 August 2025)

• S&P Capital IQ via MarketScreener (1H2026 results; market data as of 16 October 2026); TipRanks; Yahoo Finance; Stockopedia; Morningstar

• Airport Authority Hong Kong press release (15 January 2026); ACI Asia-Pacific (AAHK fiscal 2025/26)

• Census and Statistics Department, restaurant receipts and purchases releases (3 February 2026; 6 May 2026)