Chinese toy seller poised for major HK IPO windfall

Taking pride of place in 28-year-old Beijing lawyer Wu Ge’s bedroom are dozens of small figurines displayed on clear plastic shelves with designs ranging from cherubic dolls to characters from Japan’s Pokemon series.

Wu estimates that she has spent over 5,000 yuan (US$766) in the past three years buying the pieces from Chinese toy seller Pop Mart International Group, amassing a collection of over 80 figurines.

Millions of young Chinese toy lovers like her are behind the popularity of Pop Mart, a Beijing-based company due to list in Hong Kong today after raising US$676 million in an initial public offering that priced at the top of its range, valuing the decade-old firm at as much as US$7 billion.

Pop Mart’s shares could open as much as 103 percent higher today from its HK$38.50 offer price when it debuts, according to gray market trading set by Phillip Securities in Hong Kong yesterday.

The company’s main product is “mystery” toy boxes that each hold a single figurine such as “pool babies” from the elf-like Pucky range, which Wu says are her favorite, or different versions of its best-selling character, the large-eyed, round-faced Molly doll.

The boxes, which cost about US$9 each, have been a big hit with China’s millennials. Consumers born after 1995 spend more on mystery toys than any other hobby, including fancy shoes and eSports, according to a report last year by Alibaba-backed online shopping platform Tmall.

Pop Mart, the market leader, more than tripled its revenues last year to 1.68 billion yuan, according to its prospectus.

The IPO drew strong interest from investors, with the retail offer 356 times oversubscribed.

“The company operates in a niche and doesn’t really have any listed comparables in the region,” said Aequitas Research partner Sumeet Singh, who publishes on the Smartkarma research platform. “In addition, it is continuing to expand its network which will continue to aid growth.”

Pop Mart and its advisors were so confident the deal would be popular that it elected not to take cornerstone shareholders which are common in Hong Kong IPOs.

“I think consumer concepts will be a new focus in the market,” said a banker with direct knowledge of the matter who declined to be named. “In China, consumption is the growth engine of the economy.”

Pop Mart’s listing will make its 33-year-old founder Wang Ning, who holds a 56 percent share in the firm, a billionaire.

Mystery toy boxes are not new and trace their origins to Japan’s vending machine capsule models, Gashapon, a cash cow for the likes of toy maker Bandai. But Pop Mart has taken the trend to new heights, teaming up with artists to design new figurines and build up a pool of trademarks.

The firm now distributes its products in 21 countries outside China. Its customers — mostly aged 18 to 35 — are 75 percent female, the prospectus said.