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MARKETS & INVESTING | Cesar Tordesillas, Hong Kong

Chow Tai Fook to test market for IPO

The city’s stock exchange approved the listing plan of billionaire Cheng Yu-tung’s Chow Tai Fook Group, and the luxury retailer aims to list in Hong Kong next month.

Chow Tai Fook hasn’t decided whether it will sell a 10 percent or 15 percent stake in the unit, one of the insiders said with the larger stake raising as much as $4 billion.

The sale targets almost double the amount raised by Milan- based Prada SpA in the biggest IPO this year in Hong Kong, where surging disposable income in China has helped drive monthly retail sales to a record. The jewelery unit may be valued as high as seven times annual revenue, double what LVMH Moet Hennessy Louis Vuitton SA (MC) paid to buy out Bulgari SpA last month, and triple Tiffany & Co. (TIF)’s market capitalization.

“I doubt if investors are willing to pay them a high premium over rivals,” Patrick Yiu, managing director at Cash Asset Management Ltd.

Chow Tai Fook Group has more than 1,300 stores in Asia and plans to increase the number to 2,000 by 2016, according to the Hong Kong-based company’s website. The jewelry chain has annual revenue of more than HK$30 billion ($3.9 billion), according to the website.

“Chow Tai Fook should receive strong demand despite the market volatility,” Steven Leung, a sales director at UOB Kay Hian said today by telephone. “We have not come across a sizable IPO for quite a long time, there is abundant liquidity in the market, especially among long-term funds, and they could quickly snap it up.”

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