Fu Shou Yuan studies Hong Kong expansion plan
Chairman aims to build the funeral service provider into a global leader with a focus on quality after the success of its US$215 million listing
Fu Shou Yuan, the mainland's biggest provider of funeral services, plans to expand to Hong Kong as its chairman envisions building the company into one of the world's top players in the industry.
Bai Xiaojiang told reporters last weekend that the Shanghai-based firm had begun studying the feasibility of offering burial services in Hong Kong and it was enlisting the help of a professional team to map out a detailed plan.
"China's big population of 1.4 billion has created tremendous opportunities for domestic death service companies," Bai said. "We have the potential to become a global leader as long as we can offer good services."
Fu Shou Yuan received a warm response from investors last month as its US$215 million initial public offering was nearly 700 times oversubscribed, and that was followed by a 44.7 per cent jump in its share price during the Hong Kong listing debut on December 19.
Bai admitted that the successful fund-raising exercise and the explosive debut cemented his belief that Hong Kong was an ideal market to tap as investors understood the company's value.
Benefiting from an inexpensive land bank in coastal cities such as Shanghai, Fu Shou Yuan enjoyed a gross margin of 80 per cent in the burial service business for the first half of last year, which represented 80 per cent of its total revenues.
The mainland has a tight grip on funeral and burial services with the authorities controlling the land supply for cemeteries.
In Shanghai, prices of burial sites have soared in the past years due to limited land while demand for quality resting places for the deceased increased and the ageing problem worsened.
Qiao Kuanyuan, a professor at the University of Shanghai for Science and Technology, said 80 per cent of Shanghai's cemeteries covering 500 hectares were likely to run out of space to provide additional burial plots by 2015.
A tomb site of less than one square metre in the city could be sold at more than 50,000 yuan (HK$63,600), much higher than the average housing price.
Wang Jisheng, general manager of Fu Shou Yuan, played down speculation that the dead were battling the living for land, defining cemeteries as service providers rather than dwellings as they helped people house the spirits of the elderly generations.
The company now has presence in eight provincial-level regions and Bai said it planned to expand throughout the country except for Tibet.
The Ministry of Civil Affairs is now revising the rules governing funeral and burial services. Bai said the new policies would be aimed to give market forces a bigger role in the industry.
"The previously tightly regulated market resulted in strong pent-up demand," he said. "The potential reform will definitely pay out huge dividends for the businesses and the key to success lies in the quality of services to the clients who are increasingly willing to pay more."