Cafe de Coral is making its first foray into the Shanghai fast-food market with a 40.5 million yuan (about HK$38.17 million) investment in a mainland quick-service restaurant chain. The Hong Kong-listed fast-food operator has agreed to acquire 50 per cent of Shanghai New Asia Snack - a move that would allow it to compete with domestic and international rivals such as McDonald's and Kentucky Fried Chicken in eastern China. Chairman Michael Chan Yue-kwong said the investment was in line with the company's plan to expand into China's under-developed but vast fast-food market. The size of the market was estimated at eight billion yuan, which accounted for just 2 per cent of the nation's food service industry, he said. 'In the past six to nine months, we have been mentioning our intention of entering the mainland market,' Mr Chan said. 'And we have finally decided to team up with A-share listed Shanghai New Asia [Group] to jointly operate Shanghai New Asia Snack - the largest Chinese style fast-food operator in Shanghai.' Shanghai New Asia Snack, which operates a chain of 90 restaurants under the 'New Asia Dabao' brand name, had sales of 194 million yuan last year. Mr Chan said out of the 40.5 million yuan the company planned to invest, 35.5 million yuan was for the purchase of a 50 per cent stake in Shanghai New Asia Snack from Shanghai New Asia Group. The remainder was to be used as working capital. He said the restaurant chain had enjoyed tax incentives and preferential offers from the Shanghai municipal government. Cafe de Coral would attempt to keep those benefits after taking the 50 per cent stake, he said. Excluding the preferential offers, Shanghai New Asia Snack generated a pro-forma net profit of eight million yuan and profit margin of 4 per cent. 'A reasonable profit margin should be sustained at 10 per cent, which we hope to achieve in about two to three years,' Mr Chan said. In a bid to hit the target, Cafe de Coral would focus on product development, operation logistics, cost controls, marketing and shop image. The company would review prices and enlarge the restaurant's menu to draw a younger crowd. Sitting on HK$450 million cash on hand, Mr Chan said Cafe de Coral would continue to look for other business opportunities in China, such as food-processing. But another acquisition of a fast-food chain in China was not expected in the medium term.