HONG KONG -- Shares of noodle shop chain Tam Jai International, a unit of Japan's Toridoll Holdings, fell 7.5% on their debut Thursday on the Stock Exchange of Hong Kong.
The company raised 1.04 billion Hong Kong dollars ($134.59 million) after pricing its offering at HK$3.33, the bottom of the marketed range. The shares closed Thursday at $3.08 after falling as low as HK$2.98.
Tam Jai, which has expanded its network from Hong Kong to mainland China and Singapore over the past year, operates 157 shops under the fast-casual brands TamJai Yunnan Mixian and TamJai SamGor Mixian and plans to use the IPO proceeds to expand into Japan and Australia.
The IPO attracted Matthews Asia, RAYS Capital Partners and China Southern Fund Management as cornerstone investors, with the trio taking 11.2% of the shares offered.
On Wednesday, analyst Oshadhi Kumarasiri of LightStream Research had said in a note on the SmartKarma platform that he was "confident that Tam Jai can generate substantial listing gains despite lower than expected IPO subscriptions."
He based his view on Tam Jai pricing its offering at a "steep discount to its peers" such as Yum China and Haidilao International Holding in terms of market value as a multiple of sales or operating profit.
According to its prospectus, Tam Jai aims to add 173 restaurants by March 31, 2024, with 71 new stores targeted for mainland China, 25 for Japan and 15 for Australia.
Toridoll, which operates udon noodle chain Marugame Seimen in Japan, bought Tam Jai for HK$1.9 billion in 2018. Tam Jai, founded in 1996, generated a profit of HK$287.8 million on revenues of HK$1.79 billion in the year ended March 31.
While the IPO pricing showed a 135% rise in Tam Jai's valuation since Toridoll's takeover, analyst Clarence Chu of Aequitas Research noted on SmartKarma that recurring earnings before interest, tax, depreciation and amortization only grew 23%.
Toridoll stated that Tam Jai was "leading the group's overseas business," and that "it was listed with the aim of increasing creditworthiness and financing, and further improving corporate value, to aim for further growth." Even after listing, it will remain a consolidated subsidiary of Toridoll, which will retain a 74.6% stake.