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Rejected in mainland, South Beauty turns to Hong Kong for IPO

By Zhang Ye (Global Times)

08:55, January 10, 2013

South Beauty Group, a domestic restaurant chain, has successfully undergone a hearing for listing on the Hong Kong Stock Exchange and is expected to launch an initial public offering (IPO) this year, an insider told the Global Times Wednesday.

The company has met the listing requirements of the Hong Kong stock market and is capable of completing the IPO, but may delay its listing if the capital market is sluggish, said the anonymous insider, who participated in the listing process.

Beijing-based South Beauty filed its IPO application to the China Securities Regulatory Commission (CSRC) in March 2011, in hopes of issuing shares in the mainland. The CSRC rejected the application in January 2012, forcing South Beauty to turn to the Hong Kong stock market in June 2012.

The firm is very likely to succeed in launching an IPO in Hong Kong and private investors may consider buying shares if it improves management of its chain stores, Fan Jie, an analyst from Adfaith Management Consulting, told the Global Times Wednesday.

In 2012, South Beauty opened 20 new chain stores across the country and planned to expand business into small cities, but will not consider franchising, the Beijing Times reported Wednesday, citing the company's president Wang Xiaofei. Zhang Lan, the company's founder and chairman, claimed in 2011 that the company would open 300 to 500 new stores in three to five years.

This rapid expansion may arouse investors' concerns about whether the company's profits can cover the costs of opening chain stores during a gloomy period for the catering sector, noted Fan.

The average net profit margin of China's top 100 catering firms was 8.04 percent in 2011, compared to 9.42 percent in 2010, according to data from the China Cuisine Association, which said on its website that 2012 was also slow.

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