Ajisen Ramen trading suspended as deal for mainland acquisition looms
Updated: 2008-04-26 07:11
By Karen Cho(HK Edition)
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Japanese restaurant chain Ajisen Ramen plans to open 88 new stores in China, boosting its presence there to 320 locations. Zhang Ting |
Japanese noodle chain Ajisen Ramen's plan to acquire sister company Shenzhen Weiqian might be nearing completion.
Trading of the company's shares was suspended Friday, and Ajisen's management admitted that the "major transaction" leading to the suspension of its stocks is related to the acquisition deal.
Ajisen Ramen revealed its plan to buy out Shenzhen Weiqian in March 2006 in its initial public offering prospectus.
"We promised in our prospectus that we would exercise our option to acquire Shenzhen Weiqian by March of this year," Ajisen Chief Financial Officer Alan Zheng said yesterday at the company's financial results announcement.
However, Zheng didn't give any further details about the deal other than saying it is currently under review by the regulator.
The price of Ajisen shares was HK$10.10 before trading was suspended.
"The state of Shenzhen Weiqian's operations is healthy," Zheng said.
Shenzhen Weiqian will become an "indirectly wholly owned subsidiary" of the group upon the completion of the deal, and its results will be incorporated into Ajisen.
The Japanese ramen chain operates 232 restaurants in China and recorded a net profits surge of 88.4 percent in 2007 to 213 million yuan. Of which, 139 million yuan came from special income.
The group reaped 67 million yuan in interest income after its IPO last year, 38 million in management fees for Shenzhen Weiqian and the rest in tax rebates from the Shanghai Puxi municipal government.
Zheng said that after acquiring Shenzhen Weiqian, the management fee income will cease. Excluding the money generated from other income, profits from the core business of the restaurant group increased 13 percent over 2006, according to the chief financial officer.
Despite surging food prices, Ajisen managed to increase its gross profits margin by 3.4 percentage points to 66.7 percent. Chief Operating Officer Yin Yibing said the company is confident it will maintain the margin at 66 to 68 percent.
Yin said the restaurant can price in cost increases from menu changes in the spring and autumn. "We can also control costs through product mixes," Yin said. "For example, we can decrease pork on our menus when it is too expensive."
Ajisen Chief Executive Officer Daisy Poon said that expanding the restaurant's network will remain the group's priority. "Not only will we expand in first-tier cities, we will also look at second- or third-tier cities with strong growth potential," she said.
The company plans to add 88 restaurants in China, bringing the total there to 320.
Ajisen's capital expenditure for 2008 is estimated to be approximately 400 million yuan, with 165 million yuan for opening new stores.
Ajisen Ramen declared a final dividend of 0.05 yuan per share, with earnings per share sitting at 0.22 yuan.
(HK Edition 04/26/2008 page2)