ZHONG AO HOME (01538) announced that on January 9, 2026, Guangdong Xunhua (the Company's wholly-owned subsidiary) entered into a joint venture agreement with Dong Yu, Mr. Li Lixin, Ms. Peng Zhen, and Mr. Yan Zheheng. Under this agreement, Guangdong Xunhua and Dong Yu conditionally agreed to jointly establish a new joint venture company in China. The joint venture agreement outlines the rights and responsibilities of Guangdong Xunhua and Dong Yu Technology as joint venture shareholders, as well as the structure and business operations of the joint venture company. Upon completion of the establishment, the joint venture company will be 51% owned by Guangdong Xunhua and 49% owned by Dong Yu Technology. The joint venture company will engage in AI-driven property management, building services operations, maintenance, and repair services. Mr. Li Lixin, Ms. Peng Zhen, and Mr. Yan Zheheng are the guarantors of the joint venture agreement. They have jointly and severally irrevocably undertaken to Guangdong Xunhua to ensure that Dong Yu properly and promptly fulfills all responsibilities explicitly imposed by the agreement or assumed under it. They also committed to indemnify and effectively keep Guangdong Xunhua indemnified against all responsibilities, losses, damages, costs, and expenses stipulated in the agreement, or other matters that Guangdong Xunhua may suffer or incur due to any default or delay by Dong Yu in fulfilling these responsibilities. Subject to the terms and conditions of the joint venture agreement, Guangdong Xunhua conditionally agreed to cause the Company to issue 12.391 million warrants to Mr. Li Lixin, 30.3365 million warrants to Ms. Peng Zhen, and 42.7275 million warrants to Mr. Yan Zheheng (totaling 85.455 million warrants), for a nominal consideration of HK$1.00. This serves as consideration for Dong Yu's fulfillment of its responsibilities under the joint venture agreement and for the guarantors' fulfillment of their guarantee obligations. Each warrant carries the right to subscribe for one warrant share at an exercise price of HK$0.42 per warrant share (adjustable) at any time during the exercise period. The warrant shares to be allotted and issued upon the exercise of the warrants will be issued under a specific mandate. The Company will seek approval for the warrant issuance and the grant of the specific mandate at an extraordinary general meeting. The Group intends to launch its AI business through the joint venture company. The Company expects that this new business will generate additional operating revenue and profit for the Group, contributing to the continuous enhancement of its profitability. Establishing the joint venture will not only help the Group explore business development, cooperation, and investment opportunities in the AI field but also create comprehensive synergies by upgrading traditional labor-intensive operations into a technology-driven ecosystem. The AI department will act as a central intelligent hub, automating property management and cleaning workflows through smart scheduling and predictive maintenance, significantly reducing reliance on manual labor and lowering operating costs. Concurrently, it will utilize exclusive community data to drive precision marketing, enhancing the sales conversion rate for the real estate agency business. This integration is expected to not only improve the profit margins and service quality of all subsidiaries but also transform the Company from a standard service provider into a high-value property technology platform, achieving a strategic repositioning. Furthermore, the Directors believe that issuing the warrants will serve as a performance incentive for Dong Yu, which will be responsible for managing the business operations and operating expenses of the joint venture company. This move can also broaden the Company's shareholder base and capital base, consolidate its financial position, and provide the Group with greater financial flexibility to further develop its business. The issuance of the warrants will not have any immediate dilutive effect on the shareholding percentages of existing shareholders.
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