CTG’s $2.2bn could power overseas expansion and M&A, says Bloomberg

By Charlotte Turner |

Following China Tourism Group Duty Free Corporation Limited (CTG) listing on the Hong Kong Stock Exchange last week, Bloomberg Intelligence tells TRBusiness that it believes the company’s earnings outlook in 2023 to be positive and that a gradual easing of Covid measures next year should facilitate a quicker ramp up of its new Haikou Mall, delivering a sizeable boost to Hainan-generated duty free sales.

 

As reported, China Duty Free Group (CDFG) parent company, China Tourism Group Duty Free Corporation Limited (CTG) is seeking up to HK$17 million/$2.17 billion (based on the offer price of HK$165.50 per H share) in its second public listing with the Hong Kong Stock Exchange after officially launching on Friday 12 August.

 

“For CTG, the $2.2 billion IPO offering is a more downsized financing vs last year when they were seeking around $5 billion,” confirms Angela Han Lee for Bloomberg Intelligence – APAC Gaming & Hospitality.

 

“This is reflective of a tougher market environment and poorer near-term earnings visibility due to Covid disruptions. Nonetheless, the $2.2 billion funding could give them more flexibility to pursue overseas expansion and other M&A that could help them shore up global [duty free] market share in the long-term.”

 

Angela HanLee for Bloomberg Intelligence - APAC Gaming & Hospitality.

Angela Han Lee for Bloomberg Intelligence – APAC Gaming & Hospitality.

HanLee reiterates that CTG’s listing may likely be HKEX’s biggest listing of the year. It would be just one of two listings so far this year that surpassed $1 billion; the other being Sichuan-based mining and manufacturing company, Tianqi Lithium, which raised $1.7 billion.

 

She also provides a forecast for Sanya’s duty free sales performance this year against the backdrop of lockdowns and store closures in the region.

 

“In light of volatile tourist inflows in Sanya due to Covid restrictions, we see around a 28% downside risk to authorities target of 100 billion yuan/$14.7bn in Hainan duty free shop sales [for 2022].

 

“Specifically, CTG Duty Free’s Hainan revenue may only reach around 58 million yuan in 2022 (assuming it retains ~80% market share in the province).”

 

Providing a longer term forecast she adds: “The 60 billion yuan ($9.4bn) generated by Hainan’s duty free shops in 2021 currently only represents about 11% of [global] duty free spending and only third of Chinese total duty free spending before the pandemic, which may imply further runway for Hainan’s local demand penetration to rise longer-term.”

 

The full-length interview will appear in TRBusiness’ 25th anniversary edition, available to read in e-zine format and in print from 3 October. Print issues will be available to pick up from the TFWA World Exhibition in Cannes from that date.

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