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People shop at Sanya International Duty-Free Shopping Complex in the Hainan provincial resort city of Sanya on August 6, 2020. Photo: Xinhua.

China Tourism Group picks Hong Kong for US$2.5 billion IPO as the world’s largest duty-free retailer raises capital to expand

  • The world’s largest duty-free retailer aims to raise up to US$2.5 billion, making it the largest IPO in Hong Kong in 14 months
  • The company will start its public offering from Monday to Thursday, to be priced on August 18 before trading commences on August 25
China Tourism Group Duty Free Corporation is aiming to raise up to US$2.5 billion of funds in Hong Kong, after the world’s largest travel retailer prepare to price its shares in the city’s biggest initial public offering (IPO) in 14 months.

The Beijing-based company is offering 102.76 million shares at between HK$143.50 and HK$165.50 each, according to a term sheet seen by South China Morning Post. That allows it to raise up to US$2.17 billion at the top end of the price range, and as much as US$2.5 billion if an overallotment option is exercised.

The stock sale would rank as Hong Kong’s largest since the US$2.06 billion dual- primary listing by the Chinese electric-car maker XPeng in June 2021. Still, the size was slightly smaller than previously estimated target, as China’s resurgent Covid-19 outbreak kept cities such as the Hainan beach resort of Sanya under lockdown and hurt travel and sales outlook.

To anchor the IPO, the company allocated 39.3 per cent of its IPO shares to nine cornerstone investors for a combined HK$6.24 billion (US$795 million), based on the mid-point of the price range, according to the term sheet.

The China State-Owned Enterprise Mixed Ownership Reform Fund will take up a HK$1.2 billion stake, followed by the South Korean cosmetics producer AmorePacific Group, China’s state shipping firm Cosco Shipping, and Rongshi International, each with HK$785 million block.

Tourists in a duty-free shopping centre in the Hainan beach resort of Sanya on March 12, 2020. Photo: Xinhua.

Shanghai Airport, liquor distiller Luzhou Laojiao, China Structural Reform Fund, Hainan Free Trade Port Construction Investment Fund and the Los Angeles-based asset manager Oaktree Capital Management are the other cornerstone investors. The allocation comes with a six-month lock-up period.

This marks the second attempt by the world’s largest travel retailer by sales to seek a listing in Hong Kong, after it shelving the plan last December because of sluggish market conditions.

“Hong Kong remains an international fundraising centre even amid a volatile market,” said Tom Chan Pak-lam, chairman of The Institute of Securities Dealers of Hong Kong. “If it can price at the top end, and [if] it debuts at a good price, it will help encourage more big IPOs.”

Tourists at a duty-free shopping centre in the Hainan provincial capital of Haikou on October 1, 2021. Photo: Xinhua.

The maximum offer price represents a 27.3 per cent discount to the company’s yuan-denominated shares in Shanghai, which fell 2.8 per cent to 195.66 yuan on Friday.

The company will kick off the IPO from Monday and price its shares on August 18. The stock is expected to commence trading on August 25.

The IPO comes as Fitch Ratings said on Thursday that tourism activity in China was gradually recovering amid easing of Covid-19 travel restrictions. The number of domestic travellers jumped 62 per cent in July from June, even as the recovery remains uneven across different regions and companies, it added.


“In the medium and longer term, China’s tourism has huge room for growth [and because of this] international and retail investors will be interested in investing in this IPO,” said Louis Tse Ming-kwong, managing director of Wealthy Securities.

Tse said this IPO is a “shot in the arm” for Hong Kong’s IPO market, which has turned quiet since Beijing launched a regulatory crackdown on the tech sector in July last year.


“[Hong Kong] needs a successful blockbuster IPO to turn the tide around. The response to the IPO will determine if more big players will come to list here.”

The duty-free retailing group played down the impact of Covid-19 resurgence in the Hainan province. Deputy general manager Chang Zhujun said at a press conference on Friday that the company’s online business will counter the impact and that it was making preparations to reopen its shops when curbs are removed.

“This will be a short-term impact,” he said, adding that upcoming projects will drive growth in the medium to long-term.

The company operates five duty-free shops in Hainan and has one under construction in the provincial capital Haikou. It also operates the world’s biggest duty-free complex in Sanya and accounts for about 90 per cent of the market there. Hainan is expected to account for half of a US$40 billion nationwide duty-free market by 2025.