Coronavirus halts IPO of Hong Kong-based sushi restaurant chain
Price growth for seafood imported into Hong Kong is slowing even as demand for seafood continues to grow, according to one of the biggest sushi chains operating in the city-state.
Average wholesale costs of seafood rose by an average 7.8 percent per year between 2014 and 2018 and will rise an average 2.8 percent per year between 2018 and 2023, according to documents published by leading local Japanese restaurant chain operator Daikiya Group Holdings Co.
The company, which had been seeking an IPO on the Hong Kong Stock Exchange, pulled the offer on 12 February due to “prevailing market conditions” related to the coronavirus outbreak, according to the South China Morning Post.
Published in a prospectus for would-be investors, the prices calculated are the weighted average price for shrimp, salmon, and mackerel imported into Hong Kong – a free port where import duties don’t apply. Daikiya, which targets the mid-range of the market, reported profits of HKD 37.2 million (USD 4.8 million, EUR 4.4 million) on revenue of HKD 808 million (USD 104 million, EUR 95.6 million) in 2018.
The company did not go into detail as to why it believes growth in prices will drop, but greater supply of salmon into China may be a factor.
Daikiya operates 14 buffet-type sushi restaurants across Hong Kong, and wants to expand that number while also building a new central kitchen and processing center to reduce costs and labor needs across its outlets. The company operates six brands in total, including a la carte Japanese-type restaurants serving imported salmon and other seafoods to its clientele. Prices quoted to SeafoodSource average between HKD 200 (USD 25.73, EUR 23.67) for lunch and HKD 300 (USD 38.60, EUR 35.50) for dinner at the Daikiya ST restaurant, located in Shatin Plaza, near Hong Kong’s racetrack.
The company’s seafood suppliers include Yonghuo Aquatic Products Trading Co., Ocean Shore Ltd., and Sin Shun Asia Co.
Hong Kong has long been a taste-setter for mainland Chinese consumers, many of whom visit the city for both business and leisure, although Japan has in recent years started to become a top destination for Chinese visitors, in part due to improving political ties between the two countries.
Pro-democracy protests that gripped the city for much of 2019 have dented foot traffic into the company’s restaurants over the past year, Daikiya noted in its prospectus. However, it expects the financial hit to be temporary and is predicting growth of six percent per year for the broader buffet-style Japanese dining sector in Hong Kong.