Parent of Hong Kong chain store Japan Home Centre begins share offer

Bankers expect stock to price on Tuesday and for trading to begin on September 25

PUBLISHED : Wednesday, 11 September, 2013, 12:44pm
UPDATED : Thursday, 12 September, 2013, 3:09am

International Housewares Retail, which owns the Japan Home Centre chain of shops that sell low-priced housewares, plans to raise up to HK$607 million in a Hong Kong float, even as growth in retail sales slows.

The firm is offering shares in an indicative price range of HK$2.22 to HK$2.81 each, which translates into a price-earnings ratio of 12.6 times to 15.9 times next year's forecast earnings, according to a term sheet seen by the Post.

LIM Advisors, a Hong Kong-based hedge fund with about US$1.5 billion of assets under management, said it would invest US$8 million as a so-called cornerstone investor. That represents just over 10 per cent of the planned initial public offering.

Bankers familiar with the deal said the order book had been fully covered but that a greenshoe option would probably be exercised to allow for the sale of additional shares to both long-only investors and hedge funds.

The retailer plans to use half the proceeds raised to fund the opening of 200 new shops in Hong Kong and other Asian cities over the next three years.

The firm derives 89 per cent of its revenue from its Hong Kong shops, all of which are leased. Co-founder and vice-chairman Lisa Ngai Lai-ha said the firm was cushioned from volatile rental prices because the chain was well known in Hong Kong.

"In a survey, 99 per cent of Hongkongers said they recognised our brand, so we don't need to be in the first-tier retail spaces or on the busiest floors," Ngai said. "Our rental costs have been stable at 13 per cent for the past three years."

Chairman Peter Lau Pak-fai said revenue from established markets like Hong Kong, Singapore and Macau would support its mainland shops, launched last year, and Malaysian shops, launched in 2011, which have yet to become profitable. The retailer plans to offer men's health and personal care products and higher-end merchandise.

The firm started taking orders from institutional investors yesterday and will offer shares to retail investors from today. The shares will be priced on Tuesday and trading is scheduled to begin on September 25.

Hong Kong's total retail sales volume rose 8.9 per cent in July from a year earlier and a revised 13.3 per cent in June, according to government figures, as growth in the mass-market segment slowed while that in the luxury segment remained robust.