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Circle K Convenience Stores (HK) is planning to raise net proceeds of HK$159.6 million listing on the Growth Enterprise Market.

The retail chain, operated by Convenience Retail Asia (CRA), plans to issue 163.9 million shares in an initial public offering (IPO) which begins today, subject to an over-allotment option.

The IPO will end on Friday, and shares are expected to begin trading on January 18.

The offer price will fall between the range of HK$1.05 and HK$1.15, representing a price-earnings ratio of 13.09 to 14.13 times.

Yesterday it began a five-day placing to institutional investors, comprising 80 per cent of the shares on offer -  131.12 million shares.

BNP Paribas Peregrine is the offer's global co-ordinator and sponsor.

CRA chief executive Richard Yeung Lap-bun said the proceeds would be used to fuel mainland expansion.

The group, which is a wholly-owned subsidiary of Li & Fung (Retailing), plans to set up its first outlet in China before September. It wants to establish 100 outlets in Guangzhou and other cities in the Pearl River Delta Region by 2003, then move into Shanghai and Beijing.

Mr Yeung said the aggressive expansion into China did not reflect pessimism in the performance of Hong Kong's retail-sector stocks.

'In fact, the stocks of old-economy companies which have incorporated new technology into their business have performed pretty well,' he said.

'The reason for our focus on China is because we expect it to become the largest market for convenience stores in the next 10 years.'

The group is seeking partners on the mainland to operate the retail chain but, according to Mr Yeung, will maintain a controlling stake.

CRA has an exclusive licence to operate the Circle K brand in Hong Kong, Macau, and most of the mainland.

At the end of last year it had 123 outlets in Hong Kong. Arch-rival 7-Eleven, operated by Dairy Farm International Holdings, has more than 400 outlets.

Mr Yeung said CRA planned to open 20 new outlets this year, and maintain an annual growth rate of between 20 per cent and 30 per cent in the next three years.

In 1999 the group had an attributable profit of HK$6.6 million, a significant improvement from the loss of HK$22.98 million a year earlier.

In the first eight months last year, net profit was HK$28.24 million, on turnover of HK$710.27 million.

Mr Yeung said the increase was due to the implementation of a new customer-driven, high-technology business model.



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