SHANGHAI (Bloomberg) – China's largest hotpot chain, whose co-founder is the new billionaire of Singapore, is fueling investors' appetite as well.
Hadilao International Holding, one of the largest additions to the MSCI Emerging Markets Index by market capitalization, increased the Hong Kong listings by more than a percent last September, while the Hang Song Index increased by about .5 in the same period. sli percentage has decreased.
Analysts believe the rally is still steamy: The 12-month consensus target price of HK $ 33 (S $ 5.84) is about 4 percent above the current level of the stock.
Shares in Hong Kong's start-up business rose 2.4 percent on Tuesday.
According to data from Frost & Sullivan, the Sichuan-based company is a market leader in hotspots in China, accounting for about 14 percent of the country's $ 21 billion restaurant scene.
Its co-founder is the latest entry in Forbes Magazine's Singapore billionaire list this year. Mr. Zhang Yong, 48, is the third highest person in the Republic with a wealth of $ 8.8 billion (S $ 8 billion), while his wife, Sue Shu Ping,. Ranked 14th with $ 49 billion in assets. According to Forbes, Mr. Zhang and Koo Shu are both citizens of Singapore.
The lack of listed competitors Hydila – there is only one other hotpot stock, Xiaobuxiabu – has increased its temptation, prompting comparisons of the world's most profitable distillery, whose fiery drink is tempting and difficult to obtain.
The hotpot's expected rapid growth in China is also expected to benefit Hedila from shortening its front-runner position, analysts said.
The Frost & Sullivan projects will grow 10.2 percent of the hotspot chain by 2022 and reach 700 million billion yuan (S $ 137.5 billion), leaving the restaurant industry behind.
"China's hotspot market is still very fragmented," Arnold Tam, a Hong Kong-based analyst with Bright Smart Securities, said in an email. "Headilao's market share is expected to rise as the industry evolves in the direction of strengthening strong players."
While the Chinese economy has been growing at its slowest pace in three decades and consumer confidence is diminishing, the food industry is still relatively unattractive. Between the sluggish global economy and the geopolitical uncertainty, Hedila's revenue is projected to be 60 percent this year and 40 percent next year, according to analysts' estimates compiled by Bloomberg.
Consumers encouraged by the provision of funds, such as free manicure, shoulder massage and dance performances by Chen, are ready to queue for hours to get a table at one of its more than 500 outlets in China. He also runs a delivery service that sends pots, induction cookers and fresh food to customers at home.
According to data compiled by Bl Restaurant Mumberg, the revenue of the restaurant chain increased almost threefold over the past three years to 17 billion yuan in 2018, while profits increased by 500 percent to 1.7 billion yuan in the same period.
In comparison, Xiaobuxiaboo Catering Management China Holdings – revenue of other Chinese hotspot stocks, has doubled over the same period while profitability increased by 63 per cent.
Headilao buys most of its food supply and seasonings from affiliated companies, which shows strong control over its supply chain, analysts at Yanking-led China Securities Finance Corp wrote in a note last month. It has also managed to reduce employee turnover through its incentive system, which includes paying up to 2.8 percent of restaurant profits to store managers.
His fate was also aided by a food safety scandal in rival Xiaobuxiabou in September last year, when a customer in Shandong province allegedly discovered a mouse in a hotspot, causing shares to collapse. The allegations were contested after an initial preliminary investigation by Xiaobuxiabou.
Headilao is expanding overseas as well. In April, it opened a London outlet, bringing the number of stores outside China to 46.
Still, the excitement around his stock has made it even more expensive. It is doing business around 57 times the estimated revenue for the next 12 months, while Ziaqiabiabu is 20 times. Guangzhou Restaurant Group, a Cantonese restaurant chain operator, trades 28 times.
"At an expensive level, it is easier to reduce the stock than it is to grow," said Ruyu Wen, Beijing's Highcastle Asset Management analyst.