Jewelry retailer Hong Kong Fook Tai Holdings is seeking an initial public offering on the growth enterprises market board, aiming to open more retail stores and improve brand recognition.
Fook Tai runs seven retail shops under the brand of "Fook Tai Jewellery" in Hong Kong, while also selling products to VIP customers at its office. The company is a wholesaler of products mainly to a few jewelry retailers with stores outside Hong Kong and is a trader of recycled gold products.
The company's products come under three major categories - gold jewelry, platinum, karat gold and silver jewelry, as well as gem-set jewelry for mid-to-high-end customers. Those categories accounted for 32.4 percent, 4 percent and 24.3 percent of total revenue in 2017 respectively.
Recycled gold products bought from the public and sold to recycled gold products collector-dealers who resell them to goldsmiths, generated 39.3 percent of total revenue during the same period.
All the retail shops of Fook Tai are in residential areas of non-prime districts in Hong Kong, including Tsuen Wan, Jordan, Sham Shui Po, Tseung Kwan O, Sheung Shui and Kwun Tong. Fook Tai believes these locations will help grow the loyal customer base with its focus on mid-to-high-end products.
It intends to increase sales in major shopping and residential areas after going public. The company plans to open two new street-level shops in North Point and Sheung Shui in June and October, 2018 respectively.
The directors of Fook Tai believe the company should broaden its customer base and try to attract mainland customers.
The new retail store in Sheung Shui near the border is expected to benefit from mainland tourists including those who are in Hong Kong on short stays.
The jeweler says North Point is an area with a population comprising a considerable number of high-income immigrants from mainland China.
Fook Tai plans to refurbish its existing retail stores after going public and aims to attract more young buyers, since this segment aged between 20 and 25 years ismore fashion-conscious and willing to spend on fashion jewelry for daily wear.
The sales of recycled gold products have been accounting for an increasing share of revenue. In 2014, these sales made up 22.8 percent of revenue and it climbed to 39.3 percent in 2017.
The fluctuation of gold prices may adversely affect the business of the company, Fook Tai says in the IPO prospectus.
Meanwhile, although a commissioned report by Frost & Sullivan forecasts that the jewelry retail market in Hong Kong will decline between 2016 and 2018 before recovering gradually in 2019, Hong Kong government data show that the retail market including jewelry is in a trough.
Fook Tai says turnover from retail stores is subject to the risk of decline in the coming years.
Ample Capital is the sole sponsor of the public offering.