Chinese hotpot giant Haidilao starts book building for Hong Kong IPO as it seeks up to US$1 billion

But interest for IPOs is declining amid a volatile stock market; the biggest listings in the past 12 months are all trading below offer prices

PUBLISHED : Friday, 07 September, 2018, 9:51pm
UPDATED : Friday, 07 September, 2018, 9:54pm

China’s biggest hotpot restaurant chain Haidilao will begin book building on Monday for its Hong Kong initial public offering where it is seeking to raise up to US$1 billion, as the city braces for more listings of Chinese new economy firms in a sluggish stock market.

The Beijing-based firm, known for serving Sichuan-style spicy hotpot, is in the process of the pre-deal investor education (PDIE), during which analysts discuss the company’s valuation with potential investors. It will take orders from institutional investors on Monday, according to people familiar with the matter. The IPO will be opened to retail investors on Wednesday.

The hotpot company generated a first-half revenue of 7.3 billion yuan (US$1 billion) this year, up 54.4 per cent year on year, its listing prospectus showed. Net profit increased 17 per cent to 647 million yuan during the six month period.

Funds raised from the IPO would be used to finance the company’s next three years of expansion, develop new technology and projects to enhance food safety and customer experience, as well as repay debt, it said.

Haidilao, which owns 362 restaurants, has expanded its operations rapidly to cater to a growing middle class population whose consumption is considered an integral part of the country’s new economy sector.

Recent volatility in the Hong Kong stock market, no thanks to the US-China trade war, currency turmoils in emerging markets and fear of further interest rate hikes, have dampened interest for new listings. This compared with the boom in the first eight months in which funds raised from IPOs totalled HK$187.6 billion (US$23.9 billion), representing a 161 per cent surge from the year-earlier period, according to data from the city’s stock exchange.

By Friday’s market close, the 10 biggest IPOs in the past year – including China Tower, Xiaomi, ZhongAn Online P&C Insurance – all traded below their offer prices. The Hang Seng Index fell on Friday, posting a weekly loss of 3.3 per cent as a new round of US tariffs that could hit US$200 billion of Chinese goods looms.

China Renaissance completes first steps towards Hong Kong IPO, seeks up to US$400 million

Other upcoming IPOs include investment bank China Renaissance, which aims to raise as much as US$400 million. It will begin its PDIE next week.

Meituan Dianping begins institutional order taking for up to US$4.4 billion IPO in Hong Kong, the city’s second major tech listing this year

Meituan Dianping, China’s largest on-demand online service platform, launched its offering this week in an attempt to raise US$4.4 billion. The stock is expected to start trading on September 20 on Hong Kong’s main board.