Haidilao sets IPO price at HK$17.8, top end of the range

Haidilao International Holding Ltd, Chinese mainland's biggest hotpot restaurant chain, has set a price of HK$17.8 ($2.27) for its planned Hong Kong initial public offering on Sept 18, top end of the previous HK$14.8- HK$17.8 price range, reported wallstreetcn.com citing a Bloomberg source.

At the top end, the fundraising value could reach $963 million, making it the fifth-largest IPO in Hong Kong this year, after China Tower, Xiaomi, Meituan Dianping, and Ping An Good Doctor, according to a previous report of SCMP.

Haidilao is offering 424.5 million shares -- about 8 percent of its enlarged equity capital, according to deal terms.

The price range values the hotpot chain at 30.2 times estimated 2019 earnings, people with knowledge of the matter have said. That's more than the average multiple of 16 times for the four biggest restaurant operators trading in Hong Kong, said Bloomberg.

The Haidilao public offering, which is set to start trading on Sept 26, was heavily oversubscribed at around four-times with about 13,000 subscriptions, according to Hong Kong Economic Times.

Among the five cornerstone investors of Haidilao's IPO, Hillhouse Capital and Greenwoods Asset Management have committed $90 million each. Morgan Stanley Asia and Morgan Stanley Investment will jointly take a stake worth $80 million. Snow Lake Capital and Ward Ferry will invest $80 million and $35 million respectively, reported SCMP earlier.

Haidilao plans to use 60 percent of IPO proceeds to finance expansion, while 20 percent would go toward developing and implementing new technology, the terms show. The company aims to use 15 percent of proceeds to repay debt, the remainder for working capital, said Bloomberg.

Well known for providing attentive customer service, the hotpot chain owns about 363 restaurants around the globe, according to the latest version of its prospectus.

Founded in 1994, the Chinese hotpot giant became the first eatery in China with operating revenue of more than 10 billion yuan ($ 1.45 billion) in 2017. Operating revenue of Haidilao totaled 10.64 billion yuan last year, up 36 percent from a year earlier. Net profit of the same year jumped 22 percent to 1.19 billion yuan.

According to the company's latest prospectus, its operating revenue increased 54.4 percent to 7.34 billion yuan in the first half of 2018. Net profit of the same period was 647 million yuan, up 17 percent on a yearly basis.