Hong Kong food company B&S International expects to raise HK$62.8 million (US$8 million) in an IPO from today, the majority of which will be dedicated to retail store network expansion.
The company plans to open 16 more licensed TenRen Taiwanese tea stores over the next three years and 10 more Jiu Tang Wu restaurants, which serve Japanese ramen-based foods.
And it will open the first of a planned network of Uncle Tetsu stores, a popular brand of Japanese cheesecake, for which it has recently secured the Hong Kong licence.
Retail currently accounts for about a quarter of B&S International’s turnover, but it represents the fastest-growing business segment and the company believes it offers the greatest potential for expansion. Between 2012 and 2016, B&S International grew its retail network by 128 per cent. Retail gross profits rose at a cumulative annual growth rate of about 140 per cent during the three years to March 31 last year.
The balance of the business is packaged food and beverage distribution, with its top-selling brands being UHA and Hsin Tung Yang.
B&S International currently owns and operates 47 stores across Hong Kong. It says the TenRen chain was the territory’s top-selling tea drinks brand by revenue between November 2016 and October last year, with a market share of 24.3 per cent.
Besides its existing brands, B&S International is actively seeking additional food retailing concepts to roll out.
“The group intends to capture the strong growth potentials by expanding the retail network for its existing licensed brands, particularly TenRen, and sourcing and obtaining licenses from other brands to launch new retail chains in Hong Kong,” the company said in its IPO documentation. “The group will remain prudent when expanding its retail business by continuing to adopt the self-operated model.
“The retail business currently relies on a few brands only, yet its strong performance and growth will allow the group to attract other high quality brands with potential for setting up and operating retail chains in Hong Kong, thereby expanding its retail business.”
Retail expansion will soak up about 67 per cent of the funds raised from the IPO, with 90 per cent of the shares in placement and only 10 per cent in the public pool, which closes on March 6.
Another 17 per cent will be spent on leasing and setting up new warehouse facilities and the balance on upgrading its ERP system, recruiting three additional marketing sales personnel for the distribution business and for general working capital.
