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China Tourism Duty Free said to get green light for Hong Kong IPO

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China Tourism Group Duty Free has got the green light from the Hong Kong stock exchange's listing committee for its flotation on the main board, according to a source familiar with the transaction, bringing it a step closer to what could amount to a multibillion dollar initial public offering.

The approval was first reported by IFR on Wednesday morning. The world's largest travel retailer by sales, which has a market capitalisation of 449.9 billion yuan (US$70.5 billion) based on its closing price of 230.4 yuan Wednesday in Shanghai, could be targeting to raise US$5 billion, other media have reported previously.

A multibillion-dollar deal would be a shot in the arm for the Hong Kong bourse, which ranked as the world's third-biggest IPO exchange for the first 10 month this year, behind Nasdaq and New York, largely helped by a robust first half.

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Blockbuster IPOs such as the US$5.4 billion offer by short-video platform Kuaishou, and JD Logistics and internet giant Baidu - which each raised over US$3 billion - helped the Hong Kong Exchanges & Clearing raise US$38 billion over 76 deals for the 10 months to October, data from Refinitiv shows.

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But in the second half, Li Auto was the only deal that raised more than US$1 billion, as fundraising in the third quarter stood at its lowest since the first quarter of last year, when Covid-19 impacted the market

If China Tourism's IPO kicks off before the year-end, the company could revive investor IPO appetite for the fourth quarter, which has traditionally been one of the busiest quarters of the year.

Others waiting in the wings for an IPO in the remaining six weeks of this year include artificial intelligence platform SenseTime, which is targeting to raise at least US$2 billion.

Founded in 1984, China Tourism Group Duty Free is controlled by state-owned CTG, previously known as China Travel Agency Hong Kong, which has a 53.3 per cent stake.

With 194 stores in China, Hong Kong, Cambodia, Macau, its first-half net profit surged over five times to 5.4 billion yuan year on year, it said in its interim report. The impact on sales from Covid-related travel restrictions has been partly offset by growth in its duty-free stores in Hainan, the company said.

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China's southernmost province is developing into a go-to shopping destination, with retail revenues forecast to grow to US$46.5 billion by 2025, thanks to government policies directed at boosting Hainan's offshore duty-free sector.

The Beijing-based company claims to have almost 100 per cent share of the offshore duty-free retail market in Hainan, where it opened its first offshore duty-free store in downtown Sanya in 2011. This has grown to five stores today. It is one of six entities that have permits to operate on the island.

"We have captured the core offshore duty-free sales channels in Hainan, including Haikou and Sanya airports, [and its] core downtown areas," the company said in its draft IPO filing submitted to the Hong Kong bourse in June.

China Tourism plans to use part of the IPO proceeds to expand overseas stores, such as those in Hong Kong and Macau, and stores that are on cruise ships. CICC and UBS are joint sponsors of the deal.

China Tourism said in a filing to the Shanghai Stock Exchange on Wednesday that the formal approval notice from the Hong Kong stock exchange is still pending, and therefore there is still uncertainty surrounding its Hong Kong secondary listing.

"The Hong Kong Exchanges & Clearing still has the authority to issue further opinion regarding the company's listing application," it said.

The company's plan to issue shares in Hong Kong was approved by the China Securities Regulatory Commission on November 11, it disclosed earlier in a separate announcement.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2021 South China Morning Post Publishers Ltd. All rights reserved.

Copyright (c) 2021. South China Morning Post Publishers Ltd. All rights reserved.