In this file photo dated Oct 5, 2020, tourists shop at a duty-free shopping mall in Sanya city, south China's Hainan province. (GUO CHENG / XINHUA)
The share price of the world’s largest travel retailer was flat on its Hong Kong equity market trading debut on Thursday, after raising HK$16.2 billion (US$2.1 billion) in the Asian financial hub’s biggest listing this year.
China Tourism Group Duty Free Corporation (CTG Duty Free) closed at HK$158 per share, unchanged from the share subscription price, which was marketed at the mid-range of the offering price of HK$143.50 to HK$165.50.
The debut was delayed till the afternoon after Hong Kong Exchanges and Clearing scrapped its morning trading session due to Tropical Storm Ma-on.
ALSO READ: HKEX interim profit falls 27% amid global market volatility
For the short-term horizon, investors are worried that the strict anti-pandemic measures on the mainland will derail the business performance of the company,” Venture Smart Asia’s managing partner Kenny Tang said.
For the short-term horizon, investors are worried that the strict anti-pandemic measures on the mainland will derail the business performance of the company,” Venture Smart Asia’s managing partner Kenny Tang said
But Tang is confident in the long-term performance of the company. “CTG-Duty Free enjoys a monopolistic position in the country’s duty-free shopping business. Its profit margins are as high as 30 percent and can register top-line business growth of 20 percent.”
“We do not see any catalyst that can propel a share price surge in the short run, and the pricing of the company’s H-share is not cheap,” cautioned Dickie Wong, executive research director, at Kingston Securities.
“The share price performance will depend on whether the COVID-19 pandemic is contained and whether the mainland will relax its strict anti-pandemic measures further,” Wong added.
“This is a huge variable in assessing the company’s business performance as travel retail is heavily dependent on the pace of relaxation of anti-pandemic measures.”
READ MORE: IPO reform uplifts ChiNext
CTG Duty Free managed to sell the Hong Kong shares as the island of Hainan, a major tourist destination in the country and the source of most of the company’s sales, saw one of the country’s worst COVID-19 outbreaks since Shanghai’s lockdown earlier this year.
According to Linkaters, CTG Duty Free has the largest duty-free retail network in China, and a 24.6 percent market share of the global travel retail industry in 2021. The global law firm advised CTG Duty Free on the initial public offering.
The leading travel retailer opened the largest standalone integrated travel retail complex in the world — Sanya International Duty Free Shopping Complex — in 2014.
READ MORE: Ping An associate pursues HK listing
“The company’s successful listing on the HKEX not only reaffirmed the financing capability of Hong Kong as an international financial center, and its attractiveness to mainland companies, but also marked an important milestone for CTG Duty Free in entering the international capital market, laying a solid foundation for its future international development,” Linklaters said.
The travel retailer reported preliminary net income for the first half of 2022 of 3.94 billion yuan (US$575.18 million), almost 27 percent less than the same period last year. It derives about 70 percent of sales from Hainan and 18.5 percent from Shanghai, according to its latest annual report seen by Bloomberg.