Shares in Nissin Foods drop below IPO price on Hong Kong market debut

Stock briefly plunges 12 per cent, before closing at HK$3.37, still down 5 per cent from offer price

PUBLISHED : Monday, 11 December, 2017, 12:57pm
UPDATED : Tuesday, 12 December, 2017, 10:10am

Shares in Japanese instant noodle giant Nissin Foods fell below their initial public offering price on debut in Hong Kong trading on Monday.

The stock opened down 10 per cent and briefly tanked 12 per cent to HK$3.1 in the morning. By close, it traded at HK$3.37, still lower by 5 per cent from its offer price of HK$3.54.

The company behind the Cup Noodles and bestselling Demae Itcho brands, had hoped to leverage its HK$950 million Hong Kong listing for expansion in China’s premium instant noodle market.

Its public offering, priced towards the bottom of an expected range of HK$3.45 to HK$4.12 per share, had been oversubscribed by 32 times.

Instant noodles have been falling out of favour on the mainland, as consumers become more affluent and health conscious. Nissin Foods, which ranks at No. 5 in China’s ramen market with a 2.6 per cent market share, however, promises a shift in quality to higher-priced “premium” items.

Kiyotaka Ando, the company’s chairman, has previously said in Hong Kong that China’s demand for premium ramen brands was still growing, with the most recent figures showing a compound annual growth rate of 11.2 per cent from 2012 to 2017.

Nissin Foods is Hong Kong’s largest instant noodle supplier, with a 65 per cent market share in terms of retail sales value. By March 2016, the company says, cumulative sales of the Cup Noodles brand alone, worldwide, were 40 billion servings, doubling since 2011.

The company chose to list in Hong Kong as it wanted to increase its brand awareness and expand the number of quality products it offers in China, said Ando.

Its products have been on Hong Kong shelves for years, with customer support for its flagship Demae Itcho noodles its “biggest asset”.

“Once Hong Kong consumers accept our new quality products, we can launch them on the mainland,” said Ando. “We will be targeting younger consumers, who we believe have similar tastes in Hong Kong and the mainland.”

The proceeds from the IPO will be used to upgrade the quality of its products, improve manufacturing facilities, expand the company’s distribution and sales network and for mainland mergers and acquisitions, according to a company prospectus.

Elsewhere, Riverine China Holdings, a Chinese property management company, rose 3 per cent from its IPO price to trade at HK$1.59 on Monday morning. Solis Holdings, a Singapore engineering service provider, plummeted to 67 Hong Kong cents, 21 per cent lower than its offer price.

Shandong International Trust, the first Chinese trust listed in Hong Kong, continued to struggle on its second day of trading. It was quoted at HK$4.39 on Monday morning, down 3.3 per cent from its offer price of HK$4.54.

Japanese creator of the instant ramen eyes Hong Kong IPO, and promises hefty investment to spice up its products