China’s tea companies hard-pressed to successfully list

China’s tea companies hard-pressed to successfully list

Staff Reporter

2013-05-20

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A Bama Tea store. (Photo/CFP)

Despite having capital support, tea enterprises find it very challenging to get listed on the A-share market in China, owing to their small revenue scale, limited profit-earning capabilities, poor internal management and limited scope for business expansion.

The Fujian-based Bama Tea recently hit headlines on the mainland with news of it preparing to launch an initial public offering (IPO) after acquiring funds totaling 150 million yuan (US$24.4 million) from four venture capital companies.

However, Bama’s ambition to become China’s first listed tea company is “very unlikely,” China Business News reported. “The possibility is very small,” the newspaper said, citing Ouyang Daokun, secretary-general of the China Tea Leaders Club.He was personally not optimistic about the stock market launch of a tea company, Ouyang said.

Since the 1990s, no Chinese tea enterprise has succeeded in getting listed on the stock market, according to the report.

Last year, the Fujian Anxi Tiekuanyin Group was expected to enter the A-share market as it had reached the last leg of the journey involved in its stock market launch. Its sprint at the time encouraged many other tea businesses to do the same.

Anxi Tiekuanyin later withdrew its IPO on Jan. 7. Another tea company, Hua Xiang Yuan, gave up its IPO application in April. So far, none of tea companies on the mainland have realized the dream of becoming China’s first tea A-share, the China Business News reported.

In Ouyang’s eyes, no tea company could overcome the three challenges to get itself listed, which are namely a small revenue scale, limited profit-generating capability and poor internal management of the company, the newspaper said.

In addition, a vertical business model is also a blockade, according to Ouyang, who explained that most active tea companies in China started their business from tea gardens, before building their own brands.

Bound by tea gardens, tea enterprises are unable to expand and establish a regional monopoly, the business leader said.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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