MB

Business Context and Reporting Period

Company: MasterBeef Group (Ticker: MB)

Reporting Period: Fiscal Year Ended December 31, 2024

Business Overview: MasterBeef Group is a Cayman Islands holding company operating a full-service restaurant group in Hong Kong specializing in Taiwanese hotpot (Master Beef) and barbecue (Anping Grill). As of the reporting date, the Group operates 12 restaurant outlets. The company completed its Initial Public Offering (IPO) on April 11, 2025, listing on the Nasdaq Capital Market.

Accounting Basis: International Financial Reporting Standards (IFRS). Financial statements are presented in Hong Kong Dollars (HKD) with US Dollar (USD) translations for convenience.

Key Financial Metrics (Year Ended Dec 31, 2024)

Note: USD figures are translated at the rate of HK$7.7677 = US$1.00.

Material Changes vs. Prior Period

• Revenue Decline: Revenue decreased by 5.3% (HK$28.3 million) compared to 2023. This was driven by a decline in customer visits due to slow economic recovery in Hong Kong and the disposal of the "Chubby Bento," "Chubby Noodles," and "Bao Pot" brands in May 2024. This was partially offset by management fee income and sales of food ingredients to related parties post-disposal.
• Turnaround to Profitability: The Group recorded a net profit of HK$32.9 million in 2024, reversing a net loss of HK$37.4 million in 2023. This turnaround was primarily driven by:
  • A one-time gain on disposal of subsidiaries of approximately HK$58.7 million.
  • The absence of an impairment loss on assets held for sale (which was HK$23.5 million in 2023).
• Cost Management: Staff costs decreased by 4.7% to HK$169.6 million due to reduced headcount, though they represented a higher percentage of revenue (33.6%) due to the revenue decline. Raw materials costs decreased by 6.3% to HK$162.9 million.
• Impairment Charges: The Group recorded impairment charges of HK$4.5 million on property, plant, and equipment and HK$5.0 million on right-of-use assets related to underperforming outlets in 2024.

Guidance, Outlook, and Risks

Outlook and Strategy:

• Expansion: The Group plans to expand organically in Hong Kong and pursue overseas franchising opportunities in Southeast Asia (e.g., Singapore).
• Efficiency: Focus on leveraging the central kitchen for economies of scale, exploring AI-powered robots for service, and expanding retail sales of packaged soup bases.
• Dividends: The Company currently intends to retain all earnings for operations and expansion; no dividends are anticipated in the foreseeable future.

Key Risks and Contingencies:

• Going Concern: The filing notes a material uncertainty regarding the Group's ability to continue as a going concern due to current liabilities exceeding current assets by HK$36.3 million and a loss excluding the one-time disposal gain. Management relies on directors agreeing not to demand repayment of HK$42.6 million in loans for 24 months.
• Regulatory (HFCAA): As a Hong Kong-based company, the Group faces risks under the Holding Foreign Companies Accountable Act (HFCAA) regarding PCAOB inspections of its auditor. While the current auditor (Onestop Assurance PAC) is based in Singapore and inspectable, future changes in auditor location or PRC/HK regulations could impact listing status.
• Internal Controls: Management concluded that internal controls over financial reporting were ineffective as of December 31, 2024, citing material weaknesses including a lack of competent financial reporting personnel and ineffective risk assessment procedures.
• Operational Risks: High competition in the Hong Kong restaurant market, rising labor costs, and reliance on a limited number of suppliers.

Investor Verification Checklist

• Going Concern Status: Verify the sustainability of the HK$42.6 million loan deferral from directors and the ability to service debt without the one-time disposal gain.
• Internal Control Remediation: Review the specific plan and timeline for remedying the material weaknesses in internal controls over financial reporting identified in the filing.
• Disposal Gain Sustainability: Assess whether the 2024 profitability is sustainable without the HK$58.7 million one-time gain from the disposal of underperforming brands.
• HFCAA Compliance: Confirm the continued eligibility of the auditor for PCAOB inspection and monitor any regulatory changes regarding Hong Kong-based issuers.
• Related Party Transactions: Scrutinize the nature and pricing of transactions with related parties, including the sale of food ingredients and management fees to the disposed entities.