Caixin
Dec 30, 2019 07:29 PM
BUSINESS & TECH

‘Sauerkraut Fish’ Specialist Whets Investors’ Appetite With Hong Kong IPO

Jiumaojiu International said it plans to focus on the Tai Er brand going forward, with plans to open 180 more restaurants over the next two years.
Jiumaojiu International said it plans to focus on the Tai Er brand going forward, with plans to open 180 more restaurants over the next two years.

The operator of two popular restaurant chains plans to raise up to HK$2.2 billion ($283 million) in a Hong Kong listing, tempting investors with its high-growth formula catering to China’s increasingly sophisticated growing middle class.

Jiumaojiu International Holdings Ltd. filed its IPO prospectus on Sunday, aiming to sell shares for between HK$5.50 and HK$6.60. It plans to set a final price on Jan. 8, with trading set to begin on Jan 15. Cornerstone investors will buy $55 million of shares from the offering, including a $20 million commitment from global fund giant BlackRock. 

The deal is being underwritten by two Chinese banks, CMB International and CICC.

China is one of the world’s fastest growing restaurant markets, fueled by a growing middle class that is fast catching up with Western peers. Before the 1990s, most people didn’t engage in even simple dining out, and Western chains like KFC and McDonald’s were still considered haute cuisine by many Chinese. But tastes have rapidly risen with the country’s booming economy, providing fertile ground for operators of more upscale eateries.

Jiumaojiu is one such company, with most of its business coming from its popular Tai Er and Jiu Mao Jiu chains. The former is known for its steamed fish smothered in sour pickled vegetables, while the latter specializes in Northwestern Chinese food. Together, their 328 self-operated and franchised restaurants account for 98% of the company’s revenue.

Jiumaojiu International reported a profit of 102 million yuan ($14.6 million) in the first half of 2019, nearly double that from a year earlier. Its revenue rose nearly 50% over that period to 1.2 billion yuan.

The company is hoping to follow in the footsteps of Haidilao International Holding Ltd., operator of another popular restaurant chain specializing in hotpot. Since its Hong Kong listing last year, selling shares for HK$17.80 apiece, Haidilao’s stock has risen about 80% to trade around HK$32. 

Essence Securities said that the Tai Er chain should be able to outperform Haidilao due to higher customer turnover because of its simpler format. By comparison, Haidilao is known for its higher quality of service and a welcoming atmosphere that encourages customers to socialize. Haidilao makes up for the slower turnover with higher spending per customer, Essence said.

Jiumaojiu International said it plans to focus on the Tai Er brand going forward, with plans to open 180 more restaurants over the next two years, or 65% of the group’s new additions over that period. Essence Securities pointed out the company is in the early stage of expansion and has plenty of room for growth, even in China’s biggest cities.

Contact reporter Yang Ge (geyang@caixin.com; twitter: @youngchinabiz)

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