Anticipation is high for the impending IPO of China’s biggest jeweler, Chow Tai Fook.
Privately-owned by one of Hong Kong’s richest men, Cheng-Yu-Tung, Chow Tai Fook has applied for a $4 billion dual offering in Hong Kong dollars and in yuan by the end of this year according to The Standard, a Hong Kong newspaper.
China’s appetite for jewelry — gold, silver, and diamond — remains insatiable. Consumption jumped 49.4% to $16.6 billion for the first six months of 2011 compared to a year ago.
Chow Tai Fook is the largest player and the best positioned with strong brand recognition in China’s huge but fragmented gold market.
As important, Chow Tai Fook has quickly positioned itself in diamonds, one of the fastest growing categories in China as more Chinese travelers become enticed by the worldwide popularity of diamonds.
“From a consumer perspective the concept of buying diamond engagement rings and diamond jewelry has really taken off in the last couple of years,” said Cavender.
Chow Tai Fook owns several diamond cutting facilities in South Africa.
The company’s strong branding is largely attributed to its 1,400 stores in the region, compared to 700 stores for rival Luk Fook and 240 stores for Chow Sang Sang.
“Their strength comes down to the number of stores they operate in greater China and their positioning in the market,” says Ben Cavender of China Market Research Group. “They’ve been able to establish a pretty strong branding and loyalty.”
Analysts expect Chow Tai Fook to command valuations of 30-times earnings — which would be a higher premium to jeweler Tiffany’s (at 19-times earnings) and Prada (at 23-times earnings).
“There’s lots of hype and anticipation about this listing,” says Eddie Tam, chief executive and founder of the Hong Kong-based hedge fund, Central Asset Investments.