Hop hing branches into fast food

Hop Hing, which makes edible oils, has agreed to acquire the mainland operations of fast-food chain Yoshinoya from Hop Hing's chairman for HK$3.475 billion.

Yoshinoya is a century-old brand of beef bowl restaurants in Japan that expanded to Hong Kong, mainland China and other Asian cities. Its mainland Chinese operations, which have grown to more than 300 shops in the past 20 years, are owned by Peter Hung Hak-hip, the chairman of Hop Hing, and his family.

The acquisition values the fast food chain at 25.9 times last year's earnings, a lofty ratio for a Hong Kong fast-food chain. But the growth potential on the mainland market would justify the comparatively high ratio, said Marvin Hung Ming-kei, the president of Summerfield Profits, the holding company of the mainland operations.

A more comparable comparison would be the recent acquisition of Little Sheep Restaurant by Yum! Brands, which owns KFC and Pizza Hut. The US company offered to buy the hotpot chain at HK$6.50 per share, or more than 24 times last year's earnings.

Unlike Little Sheep, which has a nationwide network and dozens of overseas operations, Yoshinoya's mainland network is mainly located in northern China including Beijing, Tianjin, Hebei, Liaoning, Heilongjiang and Jilin.

Yoshinoya's operation in Hong Kong, which is partially owned by the Hung family, is not included in the acquisition. Since the Hong Kong operation is not wholly owned by the family, Peter Hung said he had no immediate plans to inject it into Hop Hing.

Summerfield's earnings grew 48.4 per cent to HK$120.4 million last year, from HK$81.1 million in 2009, on the expansion of new stores, from 180 restaurants in 2008 to more than 300 now.