Hong Kong's largest IPO of the year, China Duty Free Group, makes dismal debut...

Hong Kong's largest IPO of the year, China Duty Free Group, makes dismal debut

Hong Kong's largest IPO of the year, China Duty Free Group, makes dismal debut

Rebbeca Ren

posted on 10 hours ago

CDFG has an 86% market share in China, 20 times that of its nearest competitor.

China Duty Free Group (CDFG), the largest operator of duty-free shops in China, went public in Hong Kong on Thursday, raising HK$16.23 billion, making it the year's largest IPO on the Hong Kong stock exchange. 

This marks the state-owned enterprise becoming a dual-listed company in the Mainland and Hong Kong.

The raised funds will be used to strengthen domestic sales channels, expand overseas supply channels, improve supply chain efficiency, upgrade information technology systems, boost marketing, etc. According to the company's prospectus, it plans to make investments in eight airport duty-free shops, 20 duty-free stores at other ports and 20 taxable tourism retail stores nationwide.

It had a 24.6% market share in the global travel retail space last year, higher than duty-free retail giants such as Swiss retailer Dufry and South Korea's Lotte. At home, CDFG has an 86% market share, 20 times that of its nearest competitor, according to consultancy Frost & Sullivan.

"Going public in Hong Kong is expected to help the company with its long-term international growth strategy, raise the brand impact and reputation and consolidate the company's leading position," said Peng Hui, chairman of CDFG.

On Thursday, its shares closed at HK$158.00 per share, the same as the IPO price. Prices fell as low as HK$120.00 within minutes of the open, while the Hang Seng rose 3.6% to 19,968.38.

The company planned to go public in Hong Kong last year. However, it put a halt to proceedings when COVID-19 caused a freeze in international financial markets.

In the past three years, CDFG has grown steadily on the back of a boom in offshore duty-free shopping in Hainan. From 2019 to 2021, the compound annual growth rate of its sales revenue and net profit reached 18.7% and 50.8%, respectively, according to its earnings report. 

But in the first half of 2022, the company was hit by the COVID-19 resurgence in China, causing disruption to its operations and logistics. CDFG's revenue in the first half was 27.651 billion yuan, a year-on-year decrease of 22.17%.