Buyers are in the mood for food
Tsui Wah shares trade up 12.7 per cent on its first day and reflects investors' positive sentiment for small caps and low valuations
Shares of restaurant operator Tsui Wah rose on their Hong Kong debut yesterday, prompting more listing hopefuls to rekindle their issuing plans amid refreshed interest in consumer-related companies.
Joining the latest listing rush, the local cha chaan teng operator raised investors' eyebrows after the shares posted a sharp one-day gain despite the poor listing sentiment in the city which faces a tough market environment and thin trading volume.
"The successful listing of Tsui Wah, an iconic local restaurant, highlighted the positive sentiment in small retail names, underpinned by inexpensive valuations," a fund manager said, and suggests a wave of listing hopefuls would relaunch their offering plans.
However, the manager also warned that the "glittering performance" in small cap stocks provides little evidence of a solid market revival.
A cautionary tale can be found in second-hand luxury bag retailer Milan Station.
Its shares climbed more than 60 per cent on the first trading day in May last year but they have since fallen by 70 per cent.
Compared with the soon-to-be-launched mammoth US$3.6 billion People's Insurance Company of China listing, Tsui Wah raised less than US$100 million in a tepid market where investors are cautious about China's macroeconomic headwinds and poor trading environment.
Shares of Tsui Wah jumped 12.78 per cent to finish at HK$2.56, after surging by as much as 18.06 per cent during the morning session. The benchmark Hang Seng Index gained 0.24 per cent yesterday.
"Tsui Wah's story is somehow convincing and easier to understand among the recent pitch books," said Castor Pang Wai-sun, head of research at Core Pacific-Yamaichi. The restaurant chain operator is a household name in the city selling eggs, noodles and sandwiches to locals seeking quick meals and takeaway food.
The stock had been priced as high as HK$2.77 in the pre-debut grey market where shares can be unofficially traded ahead of listings, according to traders.
Yesterday's jump made Tsui Wah the third best day-one performer of the 45 companies that have priced their shares in Hong Kong this year, after Sunley Holdings and China Putian Food.
Future Land, a Jiangsu-based property developer, raised US$265 million yesterday from a Hong Kong listing, after fixing the price at the bottom of the indicative range.
The real estate company also offered a steep discount to its listed assets, pricing it at a 73 per cent discount to net asset value.
Another mainland company, the Beijing-based China Machinery Engineering Corp is also planning to raise as much as US$300 million in Hong Kong.
The company could start its premarketing campaign as soon as this Friday hoping to capitalise on the positive mood of investors.
"At this juncture, we try to gauge sentiment and collect feedback from potential buyers," said a person who has direct knowledge about the deal.