Supermarket chain to use part of HK$600m from share sale to expand Beijing Jingkelong, the city's second-ranked supermarket chain, will use part of the HK$600 million it aims to raise from a Hong Kong initial public offering to expand its Beijing network and narrow the sales gap with sector leader Wumart Stores. Jingkelong, which starts its four-day sale of the retail tranche today, plans to increase the number of its stores to 255 by the end of 2008 from 169 at the end of June. Most of the new stores will be in Beijing. The company's overseas share placement was oversubscribed by more than 20 times, said George Hongchoy, head of DBS Asia Capital, the listing's sole sponsor. The shares, to be listed on the Growth Enterprise Market, are scheduled to be traded on the Hong Kong stock market on September 25. 'Competition in Beijing is not that fierce,' Jingkelong chairman Wei Tingzhan said. 'There is still room for us to expand in the city.' Wumart had 17.4 billion yuan in sales in Beijing last year, more than Jingkelong's 5.5 billion yuan. The city's retail market sales had an annual compound growth rate of 11.8 per cent and reached 290.3 billion yuan last year, said Jingkelong, quoting Beijing Municipal Bureau of Statistics figures. Jingkelong would focus on Beijing in the coming three years as customer spending there would be boosted when the city hosts the 2008 Olympic Games, executive director Li Jianwen said. The company faces intensifying competition from foreign players such as expansion-minded Wal-Mart and Carrefour as well as from domestic rivals including Wumart and Lianhua Supermarket Holdings, China's biggest supermarket chain with more than 3,700 stores. Mr Wei said Jingkelong had no immediate plans for acquisitions. Jingkelong operates 68 directly owned stores - four hypermarkets, 29 supermarkets and 35 convenient stores. It also has 101 franchised outlets consisting of five supermarkets and 96 convenient stores. The company reported a 23.2 per cent increase in first-half net profit to 47.3 million yuan, from 38.4 million yuan a year earlier. Gross margin was 12.2 per cent and net margin was 2.2 per cent. It plans to sell its shares at between HK$3.90 and HK$4.50, which represent a price-earnings ratios of 19.6 times and 22.6 times based on last year's earnings.