![Main Board Listing – Research 翠華控股有限公司 Tsui Wah Holdings Limited [Stock Code:01314]](http://data.docslib.org/img/64db1dcdfa316a7238c2a01e1544261c-1.webp)
EAST ASIA SECURITIES COMPANY LIMITED 9/F, 10 Des Voeux Road Central, Hong Kong. Dealing: 2308 8200 Research: 3608 8097 Facsimile: 3608 6113 HONG KONG RESEARCH Analyst: Paul Sham 14th November 2012
Main Board Listing – Research 翠華控股有限公司 Tsui Wah Holdings Limited [Stock Code:01314]
Sole Sponsor, Sole Global Coordinator, Sole Bookrunner : Deutsche Bank and Sole Lead Manager Sector : Consumer Services Business : A leading Cha Chaan Teng chain in Hong Kong
Total share offer: *333,334,000 shares Business of Tsui Wah Holdings (“Tsui Wah” or (25.0% of the enlarged share capital) “the Company”) Public Offer: 33,334,000 shares (10.0%) Tsui Wah is the leading Cha Chaan Teng (茶 Placing: 300,000,000 shares (90.0%) 餐廳) chain owner and operator in Hong Kong Greenshoe: 50,000,000 shares based on revenue and number of seats in * All 333,334,000 shares are New Shares 2011. With a market share of approximately 3.2%, Tsui Wah held the largest market share Price: HK$1.89 – HK$2.27 per share of the Hong Kong Cha Chaan Teng sector in Market Cap: 2011, HK$2,520 million to HK$3,027 million As of 7th November 2012, Tsui Wah owned Historical fully diluted FY11/12 PER: and operated all of its 26 restaurants under its 24.5x – 29.1x “Tsui Wah ( 翠華)” brand, including 21 Adjusted NTA per share: HK$0.57 – HK$0.66 restaurants in Hong Kong, 4 restaurants in Staffing: 1,489 (as of 7th November 2012) China and 1 restaurant in Macau.
HK Public Offer period: Tsui Wah derives substantially all of its 14th November 2012 – 19th November 2012 revenue from food and beverage sales from the restaurant operations. In addition, Tsui Receiving bankers: Wah also derives revenue from the sale of Bank of China (Hong Kong) processed or semiprocessed food ingredients Standard Chartered Bank (Hong Kong) from its central kitchen to two of the Hang Seng Bank restaurants operated by its Jointly-Controlled Share Registrar: Tricor Investor Services Ltd. Entities. Listing date: 26th November 2012
Shareholders after Listing Cui Fa (BVI) – owned as to: 59.18% - 48.19% by Mr. Lee Yuen Hong, an Executive Director and the Chairman of Tsui Wah - 37.35% by Mr. Ho Ting Chi, an Executive Director of Tsui Wah - 14.46% Mr. Cheung Yu To, an Executive Director of Tsui Wah Ample Favour (BVI) – wholly owned by Mr. Cheung Wai Keung, an Executive Director of Tsui 6.41% Wah Victor Leap (BVI) – wholly owned by Mr. Cheung Yue Pui, an Executive Director of Tsui Wah 4.76% Macca Investment (BVI) – wholly owned by Mr. Lock Kwok On Anthony, the CEO of Tsui Wah 4.50% Mr. Chau Tit Wa – a legal representative of Tsui Wah’s mainland subsidiaries 0.15% Public shareholders 25.00% 100% Use of Proceeds This report has been prepared solely for information purposes and we are not soliciting any action based upon it. Neither this document nor its contents shall be construed as an offer, invitation, advertisement, inducement or representation of any kind or form whatsoever. The information is based upon information, which we consider reliable, but accuracy or completeness is not guaranteed. Opinions expressed herein are subject to change without notice. At time of this report, East Asia Securities Company Limited has no position in securities of the company or companies mentioned herein, while its group companies may from time to time have interests in securities of the company or companies mentioned herein.
EAST ASIA SECURITIES COMPANY LIMITED
Net proceeds from the offer are estimated to be HK$631.1 million (based on an offer price of HK$2.08, being the mid-point of the indicative range) HK$ million For opening new restaurants and delivery centres and launch of catering service in Hong 126.2 Kong For opening new restaurants in China 220.9 For construction of a new central kitchen in Hong Kong 63.1 For construction of new central kitchens in Shanghai and Southern China 126.2 For upgrading information technology systems 31.6 For additional working capital and other general corporate purposes. 63.1
Financial Highlights Year ended 31st March 3 months ended 30th June (HK$’000) 2010 2011 2012 2011 2012 Revenue 440,010 598,047 762,791 167,250 223,623 Operating profit 66,653 81,837 125,462 24,193 26,768 Attributable profit 53,812 64,909 103,910 19,137 23,956
Operating margin 15.1% 13.7% 16.4% 14.5% 12.0% Net margin 12.2% 10.9% 13.6% 11.4% 10.7% Breakdown of revenue in terms of regions Year ended 31st March 3 months ended 30th June 2010 2011 2012 2011 2012 (HK$’000) %%% %% Hong Kong 404,710 92.0% 540,415 90.3% 675,293 88.5% 147,669 88.3% 188,832 84.4% China 35,300 8.0% 57,632 9.6% 80,915 10.6% 18,648 11.1% 32,535 14.5% Macau 0.0% 502 0.1% 6,583 0.9% 933 0.6% 2,256 1.0% Total 440,010 100.0% 598,549 100.0% 762,791 100.0% 167,250 100.0% 223,623 100.0% Peers comparison Name Code Market cap Historical P/E Profit margin (HK$ million) Café De Coral 341 HK 12,537 26.0x 8.0% Ajisen China 538 HK 6,142 26.5x 11.4% Tao Heung 573 HK 4,495 17.7x 7.1% Fairwood 52 HK 2,029 11.4x 7.1%
Tsui Wah 1314 HK 2,520 – 3,027 24.5x – 29.1x 13.6% Strengths/Opportunities Tsui Wah targets mid- to high-end of Cha Chaan Teng customers, which allows it to possess a better pricing power. As a result, the profit margin of Tsui Wah is notably higher than other catering stocks, reaching 13.6% in the financial year 2011/12 (FY11/12). Tsui Wah’s average spending per invoice of HK$81 in 2011 was much higher than Tai Hing New Century(太興新世代)’s HK$66 and Ngan Lung Restaurant(銀龍粉麵茶餐廳)’s HK$52, which demonstrated its premium image and pricing power in the Cha Chaan Teng sector.
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EAST ASIA SECURITIES COMPANY LIMITED
Cha Chaan Teng restaurants entered the China casual dining market in the late 1990s. In 2011, there were 3,728 Cha Chaan Teng restaurants in China, dominated by non-chain restaurant. On the other hand, Chain Cha Chaan Teng restaurants in China are still at early stage of development, with a limited number of nationwide chains. The sales revenue of non-chain Cha Chaan Teng is estimated to increase from RMB17.7 billion in 2011 to RMB65.0 billion in 2016, representing a CAGR of 28.7%. Tsui Wah, a well-established premium-branded Cha Chaan Teng in Hong Kong, should be able to grow at an even faster rate in China.
Weaknesses/Threats Hong Kong’s Cha Chaan Teng sector is highly fragmented, with approximately 89.0% of the market share held by non-chain restaurants in 2011. Even though Tsui Wah claims itself as the market leader in this sector, it held merely 3.2% market share in 2011. This degree of market share does not give Tsui Wah significant competitive advantage over smaller peers. The business of Tsui Wah is easily imitated by its competitors. Indeed, rivals like Green River Restaurant (翠河餐廳) and Hong Lin Restaurant (康年餐廳) who also target mid- to high-end Cha Chaan Teng customers started to emerge following the success of Tsui Wah. Tsui Wah’s staff costs and property rental expenses accounted for 38.5% of its total revenue in FY11/12, higher than Café De Coral’s 36.6% and Ajisen China’s 35.7%. Although there is no direct Cha Chaan Teng comparable in Hong Kong stock market, Tsui Wah’s FY11/12 P/E ratio of 24.5x – 29.1x is at premium to other catering stocks such as Fairwood and Tao Heung, which trades at 11.4x and 17.7x FY11 P/E respectively. It suggests Tsui Wah’s valuation is on the high side. Recommendation: Hit and Run
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EAST ASIA SECURITIES COMPANY LIMITED
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