Tsui Wah — a model that rev­o­lu­tion­ized the busi­ness

China Daily (Canada) - - HONG KONG -

Tsui Wah Res­tau­rant — Hong Kong’s only pub­licly listed cha chaan teng, or lo­cally-styled cafe — has re­vealed that it’s in talks that could lead to the sale of about 62.28 per­cent of its out­stand­ing shares held by sev­eral ma­jor­ity share­hold­ers. If the deal goes through, the buyer or buy­ers would have to com­ply with the law to of­fer the same terms to ac­quire all the re­main­ing shares from mi­nor­ity share­hold­ers.

Tsui Wah’s shares were last traded at HK$1.37 apiece be­fore trad­ing was sus­pended on Tues­day, valu­ing the com­pany at slightly be­low HK$2 bil­lion. When trad­ing re­sumed on Wed­nes­day, the com­pany’s shares shot up 23 per­cent to HK$1.68 each be­fore slip­ping back to HK$1.57 — still up 14.6 per­cent from the pre-sus­pen­sion clos­ing price. Only about 47 mil­lion shares val­ued at about HK$75 mil­lion changed hands.

The sub­dued re­sponse to Tsui Wah’s an­nounce­ment sug­gests that in­vestors have re­mained skep­ti­cal about the pre­mium that the prospec­tive buyer would be will­ing to pay for a com­pany that’s find­ing it­self in a bind. The once high-fly­ing res­tau­rant chain had ear­lier posted a 54 per­cent de­cline in profit to HK$72 mil­lion for the fis­cal year ended March 31, 2016. The poor show­ing was at­trib­uted to a loss of HK$9 mil­lion in the sec­ond half of the fis­cal year.

In con­trast, Tsui Wah’s com­peti­tors, in­clud­ing Fair­wood, which is at the lower end of the mar­ket seg­ment, have re­ported strong earn­ings growth for the com­pa­ra­ble pe­riod, in­di­cat­ing that Tsui Wah’s prob­lem is not cycli­cal in na­ture.

The com­pany’s busi­ness strat­egy, which had worked so well in the past, is fall­ing apart amid grow­ing com­pe­ti­tion from var­i­ous fast-food chains at the lower end of the mar­ket, as well as the pro­lif­er­a­tion of niche restau­rants in the newly gen­tri­fied neigh­bor­hoods that are of­fer­ing bet­ter food and ser­vices at slightly higher prices.

Tsui Wah’s con­trol­ling share­hold­ers, ap­par­ently, have elected to opt out rather than ini­ti­at­ing changes to meet the new chal­lenges. By so do­ing, they may have stran­gled the busi­ness model that started a rev­o­lu­tion in the cha chaan teng busi­ness.

Pa­trons may com­plain about the un­even food qual­ity at dif­fer­ent out­lets, the high prices or the im­per­sonal ser­vices. But, they have come to take for granted the ef­fi­ciency that has been the hall­mark of Tsui Wah.


The once high-fly­ing Tsui Wah res­tau­rant chain has come un­der grow­ing pres­sure, with stiff com­pe­ti­tion from var­i­ous fast-food chains of­fer­ing bet­ter food and ser­vices at slightly higher prices.

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