Yum China closes 5.29% down after soft start

Yum China's secondary listing opened soft and closed down 5.29 percent from its offering price at HK$390.2 (US$50.3), following a sluggish performance of the overseas stock market. 

The company priced its offering at HK$412 per share last Friday, a 4.8 percent discount from its US stock price of US$55.92 last Thursday.

The chain restaurant operator, which owns KFC, Pizza Hut and Taco Bell in China as well as local chains such as Little Sheep, Huang Ji Huang and East Dawning, raised a total of HK$17.3 billion in its Hong Kong listing after splitting its China unit for an IPO on the NYSE in 2016.

China's quick service restaurant sector is the fastest-growing segment of the country's catering business with 11.4 percent annual compound growth rate between 2014 and 2019, according to a Frost & Sullivan report.   

It's expected to account for 24 percent of the total catering market by 2024 with a market revenue of 1.59 trillion yuan (US$227 million) with Chinese-style quick service meals making up more than two-thirds of the segment.  

China's total catering business is estimated at 6.6 trillion yuan by 2024 with annual growth expected at 7.2 percent, as a market set to be dampened by the coronavirus pandemic would take at least two years to be back on the growth trajectory.

Chain caterers and independent food vendors have taken to digital means like self-service ordering and takeaways or third-party service sites to sustain business. 

Yum China expects the coronavirus outbreak will continue to have a material and extended adverse impact on its operational and financial results for the remainder of this year.

Comparable sales in the second quarter fell 11 percent from the previous year and digital orders, including delivery, mobile orders and kiosk orders, accounted for around 86 percent of KFC's sales and 61 percent of Pizza Hut's sales in the second quarter.

Major secondary listings in Hong Kong by Chinese firms include JD.com and NetEase Inc, which raised US$4.4 billion and US$3.1 billion in June.

Yum China said it will continue to expand and deepen its restaurant network with investment in digitalization, supply chain and food innovation.