Key points of investment
The two brands are developing in an orderly manner and are in a leading position in the industry. The company is a leading and well-known restaurant chain operator that operates the “Tam Tsai Yunnan Rice Noodle” and “Tam Tsai Sanko Rice Noodle” brand quick casual restaurant chains in Hong Kong. The Tam Tsai and Sanko brands have a history of more than 24 years and have successfully established an outstanding reputation for high-quality and delicious rice noodles in Hong Kong food culture. The Group implements a standardized business model and adopts central procurement policies to carry out effective and systematic operations, thus ensuring the stable development of restaurants. In the Asian specialty noodle store segment, the Group's market share reached 64.4%, exceeding 54.1% of the second-ranked company, and ranked first in terms of market revenue and number of restaurants. It can be seen that the company has strong competitiveness and is in a leading position in the industry segment.
The parent company is strong. Toridoll Hong Kong (a direct wholly-owned subsidiary of Toridoll Japan) acquired the company in January 2018. Toridoll Japan is a well-known multi-brand restaurant group that operates the world's largest udon chain “Marugame Seimen”. After it took over, it brought in professionals. The executives had more than 20 years of experience in restaurant companies such as Daitayaku, which will help Tam Tsai expand internationally.
The performance is stable, and the pace of expansion is firm. In terms of performance, the company's annual revenue for FY2019-FY2021 was HK$1,56/16.9/HK$1.79 billion, respectively. Among them, during the period of social unrest and the outbreak of the epidemic in Hong Kong from 2019 to 2020, the company actively expanded online food delivery services. Revenue from takeout and food delivery services increased from HK$321.3 million in FY2019 to HK$890.7 million in FY2021; the gross margin of the Hong Kong regional business increased from 71.7% in FY2019 to 73.2% in FY2020; and due to high initial set-up costs, the operating profit margin of the 2020Q2-4 Singapore business was -84.7%. In terms of expansion, as of September 13, 2021, the company has operated a total of 156 restaurants, including 76 Tam Tsai restaurants and 74 Three Ge restaurants covering 18 districts in Hong Kong, Hong Kong, Kowloon, and New Territories, China, 3 Tam Tsai restaurants in mainland China, and 3 Three Ge restaurants in Singapore, and plans to enter the Japanese and Australian markets in the future.
The efficiency of a single store is stable, and the management resilience is evident. The average daily revenue of a single store decreased by 8% from HK$40,600 on March 31, 2020 to HK$37,400 on March 31, 2021; the average turnover rate decreased from 4.8 times/day to 3 times/day. Although the turnover rate has declined due to the pandemic, the single-store revenue of mature stores has remained stable, reflecting the company's stable development and profit resilience. In the process of development, the company enhances brand power through marketing and promotion, enhances development stability, and product innovation drives competitiveness and technology building to enhance operational efficiency. Through strategic development of brands, operations, products, and technology, all aspects can assist and promote each other, and ultimately achieve healthy development of the company.
Use of capital raised: Assuming the sale price is HK$3.75 per share (that is, the median of the indicative offer price range), it is estimated that this IPO will raise approximately HK$1,177.6 million. The capital raised will mainly be used to expand the market, update infrastructure and communication facilities, and support the company's store expansion plans for the next 3 years.
Risk warning: food safety; repeated epidemics; sharp increase in raw material prices, rent, labor, etc.; industry competition intensified; takeout business and retail business development fell short of expectations