Haidilao International is seeking to raise HK$2.3 billion (US$300 million) from a stock placement to replenish its capital, days after a drastic move to trim almost one-fifth of its hotpot restaurants to stem losses. The stock sank.
The company plans to issue 115 million new shares at HK$20.43 each to SP NP Ltd, a vehicle controlled by one of its billionaire co-founders Shu Ping, according to a Hong Kong stock exchange filing early Friday. The price is about an 8 per cent discount to the stock’s closing level on Thursday.
The top-up issue, about 2 per cent of the company, follows a concurrent plan by the shareholder to sell the same number of shares at the same price to undisclosed buyers. Shu Ping and her husband Zhang Yong, the fourth richest Singaporeans according to Forbes, effectively control more than 55 per cent of the Beijing-based hotpot chain operator.
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Haidilao sank 9 per cent to HK$20.20 in Hong Kong in Friday trading, while the benchmark Hang Seng Index advanced 0.3 per cent. The stock has declined 32 per cent over the past one month, wiping out more than US$5.5 billion of market value, according to Bloomberg data.
The fundraising comes at a jittery time for the restaurant industry as a resurgence in Covid-19 cases in mainland provinces led to stricter lockdowns, clouding its business outlook. Haidilao last week announced a plan to shut or suspend about 300 outlets of its 1,597 restaurants by year end, citing low customer traffic and poor operating results.
The group plans to use 60 per cent of the proceeds to repay bank borrowings and enhance its supply-chain management, and the balance for working capital. Any unused portion would be retained as short-term deposits or invested in wealth management products, it added.
Despite more than doubling its profit in the first half, Haidilao said the results were below its expectations, as new Covid-19 outbreaks coincided with aggressive expansion. Average table turnover, which measures how fast it churns revenue, fell to 3 from 3.3 times per day, it added.
Walter Woo, a consumer analyst at CMB International Securities, downgraded Haidilao to a hold on November 8, citing lower table turnover, slower store expansion and higher staff expenses.
“Haidilao sees industry headwinds too, with the multiple resurgence of Covid-19 [cases] in the second half of the year, hitting the hotpot industry hard as it has limited delivery sales,” Woo said in an email comment. “Other reasons for the downgrade include rising raw materials, a high base in the second half of last year and weakening consumer sentiment.”
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