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Wednesday, July 20, 2016, 23:09

Tsui Wah rides high on takeover bid

By Oswald Chan and Lin Wenjie
Tsui Wah rides high on takeover bid
A Tsui Wah restaurant in Hong Kong. The popular Hong Kong restaurant chain has found itself in a predicament – seeing its profits slump due to the city’s sluggish tourism industry and, at the same time, losing local customers due to overpricing, experts say. (Provided to China Daily)

Hong Kong-listed Tsui Wah Holdings, which runs the “celebrity chain” of Tsui Wah tea restaurants, or cha chaan tengs, had a field day on the local bourse on Wednesday, with its stock price soaring an eye-catching 14.6 percent at the resumption of trading amid negotiations on a potential takeover by an independent third party.

The gain marked the stock’s steepest climb since the group was floated on the Hong Kong Stock Exchange (HKEx) in 2012. The stock closed at HK$1.57, which was still some 31 percent lower that the company’s offer price of HK$2.27.

Trading in Tsui Wah shares was halted on Tuesday pending the release of the company’s announcement on the possible takeover.

The company told the HKEx on Tuesday that potential vendors of Tsui Wah shares, including Cui Fa Ltd, Ample Favor Ltd and Victor and Leap Ltd, had been approached by an independent third party in respect of a likely disposal of shares which may lead to a change in control of the group.

The potential vendors held an aggregate 62.28 percent stake in Tsui Wah as of Tuesday, with a market value of HK$1.2 billion.

According to the company’s interim report filed in December last year, Cui Fa is owned by Tsui Wah Chairman Lee Yuen-hong and executive directors Ho Ting-chi and Cheung Yu-to.

A spokesman for Tsui Wah declined to shed light on the possible stake sale.

Tsui Wah rides high on takeover bid

UOB Kay Hian (Hong Kong) strategist Hannah Li Wai-han told China Daily that Tsui Wah’s slowed earnings growth under a stagnated economy might have triggered the rumored takeover.

“The mid- to high-end catering market has been hit by the tough economic environment, and the situation will persist. Under the circumstances, Tsui Wah, with its share price still at a high level, can be sold for a relatively handsome profit before the market weakens further,” Li said.

According to its latest financial report, more than 70 percent of Tsui Wah’s revenue derives from its Hong Kong operations, with nearly 30 percent from its Chinese mainland branches and 0.8 percent from Macao.

Li said the restaurant chain’s local business has relied heavily on mainland visitors, but with shrinking mainland tourist arrivals, mid- to high-end restaurants in Hong Kong have seen their earnings dented, exacerbated by high rentals for many of the group’s outlets in popular districts.

Despite the shortcomings, she said potential buyers will still be attracted by Tsui Wah’s clear brand status as a restaurant operator in the SAR and on the mainland.

But, for ordinary customers, the Tsui Wah brand is stuck in the middle which, in turn, has made it unattractive either to high-end or low-end customers.

“Tsui Wah is overpriced compared with other tea restaurants, and the quality of its food is no better. So, I would not choose Tsui Wah for lunch,” said Roger Hie, a 30-year-old office worker in Quarry Bay.

“I generally spend 40 to 60 Hong Kong dollars for a meal, but it costs me 80 to 100 Hong Kong dollars for a meal in Tsui Wah,” he said.

Contact the writers at oswald@chinadailyhk.com

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