Tepid response to Nayuki, world’s first listed milk tea firm, in Hong Kong amid concerns about outlook, high pricing

·3-min read

Nayuki Holdings, the world’s first listed milk tea chain, slumped on its Hong Kong debut, on concerns about its earnings outlook and relatively high pricing.

The Shenzhen-based company closed 13.50 per cent lower at HK$17.12 on Wednesday from its initial public offering price of HK$19.80, valuing it at HK$29.4 billion (US$3.8 billion). The stock opened trading 4.8 per cent lower at HK$18.86.

“The market was comparing Nayuki to restaurant chains such as Haidilao and Jiumaojiu, and its listed price was close to theirs. But investors think tea chains are different from restaurants,” said Albert Yu, analyst at Zhongtai International in Hong Kong. “People are concerned about the per shop performance and its operational efficiency, as it hasn’t earned a profit yet.”

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Founded by couple Peng Xin and Zhao Lin in 2015, Nayuki burnt close to 137 million yuan (US$21.2 million) between 2018 and last year. In 2020, its average daily sales per teahouse dropped 27 per cent to 20,200 yuan from a year earlier, partly because of the coronavirus pandemic. But in 2019 too, its sales were down, declining 9.8 per cent year on year.

But Nayuki has the widest network of shops in the segment, according to China Insights Consultancy. It had 491 shops in China as of the end of last year, covering 66 cities, and one shop in Japan and Hong Kong, respectively. It has also emerged as the second-largest high-end fresh handmade tea brand in China with 18.9 per cent market share. Hey Tea, which is owned by Shenzhen Meixixi Catering Management, is the largest such company in China.

The stock added 1.8 per cent in grey market trading on Tuesday, after rallying by as much as 11 per cent earlier. The shares were overbought 432 times by 138,807 retail investors.

The net worths of Peng, 34, and Zhao, 42, who each own about 1.1 billion shares in the company, individually touched US$2.42 billion, which makes them both the 237th richest person in China. Their total net worth makes them the 102nd richest person in China.

The couple harbour ambitions of turning Nayuki into a global milk and fruit tea chain, but Peng once said it was not aiming to become the Chinese version of Starbucks. Many analysts, however, do view it as the candidate with the biggest potential to become just that.

The company targets women between the ages of 20 and 35 and sells higher-end fresh and handmade fruit and milk tea, as well as bread made on-site. Orders on average amount to 43 yuan, which is dearer than Starbucks, which charges about 30 yuan or more for a beverage, and mid-market brands, which charge about 20 yuan for a milk tea.

It has benefited from a consumption upgrade among a younger generation of Chinese consumers looking for newer experiences amid a boom in the country’s economy.

“Nayuki is a rare stock in the Hong Kong market, in terms of the sector it is in,” said Gloria Cao, analyst at Essence International Securities in Shanghai. “Although the pricing is relatively high, I’m positive about its outlook due to its [unique] position in high-end milk tea, which can support its future growth. It’s [on] a very good competition track.”

The company introduced five cornerstone investors in its IPO – UBS Asset Management, China Universal Asset Management, GF Fund Management, China Southern Asset Management and Grand Rejuvenation Premium Selection Fund SPC.

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