Chinese hotpot chain Haidilao mulls spinning off overseas restaurants, separate listing in Hong Kong
- Chinese hotpot chain considers spinning off its business outside Greater China to better grow its business and deliver value to shareholders
- Group derived about 93 per cent of its 39.6 billion yuan of gross revenue in 2021 from mainland China, according to its latest annual report
Hotpot chain Haidilao International is considering spinning off its restaurant business outside Greater China amid weak consumer sentiment and a stringent zero-Covid policy that continues to batter its core business in mainland China. The stock advanced on the news.
The operations involving its restaurants outside mainland China, Hong Kong, Macau and Taiwan, will be placed under Super Hi International Holding, the company said in an exchange filing late on Monday. A listing of Super Hi by way of an introduction in Hong Kong has not been submitted.
“The proposed spin-off will better position the business of Super Hi and the remaining business of the group for growth in their respective geographic presences,” it added in the filing. It will also “deliver value-enhancing benefits in the long run under a separate stand-alone listing platform”.
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A potential IPO would help unlock values for both Haidilao’s China and overseas operations, according to Walter Woo, a consumer analyst at CMB International. “Each one could have their corresponding growth rate and price-to-earnings ratio and better motivate the employees under each entity,” he said by email.
Haidilao shares advanced 1.5 per cent to HK$16.24 at the close of Tuesday trading in Hong Kong. Still, the stock has declined about 8 per cent this year, erasing more than HK$10 billion (US$1.3 billion) of market value. The group incurred a loss of 4.2 billion yuan (US$624 million) in 2021, its first unprofitable year since at least 2015, as pandemic curbs roiled restaurant operators.
Haidilao operated 1,443 restaurants based on the latest statistics in its latest annual report, of which 92 per cent were located in mainland China. It derived about 93 per cent of its gross revenue and deployed 75 per cent of its fixed assets in its operations in mainland China.