Braised duck chain Zhou Hei Ya gets off to a flying start on Hong Kong shares debut

The Chinese fast food retailer climbed more than 10 per cent in morning trade after raising HK$2.37 billion in IPO

PUBLISHED : Friday, 11 November, 2016, 2:54pm
UPDATED : Friday, 11 November, 2016, 11:02pm

Zhou Hei Ya International, a Chinese fast-food chain famous for its spicy braised duck, jumped as much as 10.37 per cent on its first morning of trading in Hong Kong today.

That makes it one of a mere handful of recent initial public offerings in the city not to have got off to a sluggish start. Zhou Hei Ya is the largest food company to go public in Hong Kong so far this year.

The company’s shares began changing hands at HK$6.3, up 7.1 per cent from the listing price of HK$5.88, and climbed as high as HK$6.4 within the first hour, shrugging off market jitters that brought the benchmark Hang Seng Index down 1.54 per cent as of 10:30am.

The robust trading debut of the retailer of dried-duck necks and heads came after it set its price near the bottom end of the marketed range of HK$5.8 to HK$7.8, raising HK$2.37 billion in the IPO.

It has also made founder and chairman Zhou Fuyu, who was born in an impoverished rural neighbourhood in southwest China, into an overnight billionaire and one of China’s richest men, according to calculations by the Post.

“We believe this will give investors greater confidence and the company will continue to progress steadily,” Zhou Hei Ya’s executive director Hao Lixiao said at a press conference on Friday.

Hao said he was excited to see regulations aimed at protecting food safety being strengthened, and said the company has put in place strong legal measures for combatting counterfeiters.

With a relatively high valuation and no cornerstone investors, Zhou Hei Ya’s shares were under-subscribed by retail investors in Hong Kong and only moderately oversubscribed in its international public offering, according to filings to the Hong Kong stock exchange.

Analysts had previously flagged concerns over the premium of its offer price over other food producer peers, warning that it may result in lukewarm investor appetite, particularly following a string of lacklustre trading debuts of high profile IPOs in Hong Kong over the last couple of weeks.

Cofco Meat Holdings, the pork producing unit of China’s largest state food conglomerate, saw its market value slump by as much as 24 per cent on its first day of trading in Hong Kong on November 1, while the country’s second largest drugmaker China Resources Pharmaceutical also slid in a disappointing debut.

Zhou Hei Ya’s net profit last year rose to 552.7 million yuan, up from 259.9 million yuan in 2013, representing a compound annual growth rate of 45.82 per cent, according to the company prospectus. It operated a chain of 757 outlets across 40 cities as of the end of September 2016.