Covid-19 may be keeping people away from Wuhan, the locked-down city believed to be the origin of the coronavirus outbreak wreaking havoc on China’s economy. But the city’s first corporate resident to list so far this year, a packaged snack chain called Bestore Co. Ltd., is getting a much better reception for its Shanghai IPO.
After selling IPO shares for 11.90 yuan ($1.69) apiece, Bestore’s stock shot up by the maximum allowable 44% to finish at 17.14 yuan on their first trading day on Monday. Such big first-day jumps are relatively common in China due to unwritten rules that force most companies to cap their IPO prices at artificially low levels.
Bestore raised 488 million yuan through the listing, and has a market value of more than 6.8 billion yuan, or nearly $1 billion, following the strong debut.
Investors may be betting that Bestore’s stock will continue to climb to the high levels now commanded by two of its top listed rivals. One of those, Three Squirrels Inc., has a mouth-watering price-to-earnings ratio of 76; while another, YanKer Shop Food Co. Ltd. has an equally respectable 53. By comparison, the New York-listed Yum China, operator of KFC restaurants, has a far more modest ratio of about 25.
Bestore’s revenue grew 21% last year to 7.7 billion yuan, while its profit jumped 42% to 338 million yuan. The company has said it will feel a definite impact from Covid-19, which has caused many stores like the more than 2,000 under its name, to remain closed or sharply scale back business hours. Around 70% of its brick-and-mortar store revenue comes from shops in and around the central area of China where the company is based.
Contact reporter Yang Ge (email@example.com)