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IPO

IPO

Zhou Fuyu to join China’s ultra-rich ranking after IPO in fast-food chain Zhou Hei Ya

Forty-one year old entrepreneur and his family are set to become paper billionaires from their 77.7pc stake in US$427 million IPO of braised duck chain restaurant in Hong Kong

PUBLISHED : Monday, 31 October, 2016, 9:13pm
UPDATED : Monday, 31 October, 2016, 11:22pm

Another mainland billionaire is expected to be created, adding to the list of China’s ultra rich, thanks to a US$427 million initial public offering of Zhou Hei Ya International, a Chinese fast-food restaurant chain famous for its spicy braised duck.

The retailer of dried-duck necks and heads is poised to become the largest food company to go public in Hong Kong so far this year, with a price range of HK$5.8 to HK$7.8 apiece for 424 million shares that could give it an estimated market value of at least US$1.7 billion.

The stock is scheduled to be priced on Friday and debut trading on November 11.

The IPO will add at least HK$8.5 billion to the fortune of its 41-year-old founder Zhou Fuyu and his family, likely enough to propel them onto the wealth rankings of China’s top 500 -- making China home to the world’s largest number of new billionaires, according to calculations by the Post.

Born into an impoverished rural family, Zhou opened his first shop selling Chinese-style braised food takeaways in Wuhan, the capital of central China’s Hubei province, in 1995, and then built the business to a chain of 757 outlets across 40 cities by the end of September 2016, according to the company website and prospectus.

“In the long term, we are aiming at extending our footprint into Hong Kong,”said executive director Hao Xiaoli in Hong Kong. “We are also ramping up our online sales so as to cater to consumers in regions where we currently don’t have brick-and-mortar stores.”

Zhou Hei Ya is among a raft of Chinese braised food companies that seek to raise multibillion dollar funds from equity markets in mainland and Hong Kong, riding on young Chinese consumers’ swelling demand for braised snacks.

The company’s net profit last year rose to 552.7 million yuan, up from 259.9 million yuan in 2013, representing a compound annual growth rate of 45.82 per cent, according to Zhou Hei Ya’s prospectus.

By comparison, its bigger rival Jue Wei Food, the country’s biggest seller of spicy dried-duck necks that boasts 7,172 stores in China, reported net profit of 190 million yuan last year, slightly more than one-third of Zhou Hei Ya.

“Zhou Hei Ya outshines Jue Wei in the sense that the former manages every store directly, which gives itself an upper hand in product quality control, whereas Jue Wei relied more on franchise partners,” said Zhu Danpeng, an associate with China Branding Institute.

Analysts cautioned that Kong-listed food companies trade at a premium and that it remained a question whether investors would be keen on buying into the sector given the valuation.

“Many investors still consider food stocks listed in the city as very expensive counters,” said Hannah Li, a strategist with UOB Kay Hian.

The Zhou family owns 77.69 per cent of Zhou Hei Ya, while Shenzhen-based private equity firm Tiantu Capital and IDG Capital, a venture capital firm in China, are two pre-IPO investors subjected to a six-month lockup period.

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