Gourmet Master Surges 138% on Trading Debut in Taipei

Gourmet Master Co., operator of Taiwan’s largest coffee-shop chain, surged 138 percent on its first day of trading in Taipei after raising funds in an initial public offering to finance an expansion in China.

Gourmet Master, which operates stores under the 85C brand in Taiwan, China, Australia and the U.S., rose to NT$400 at the close of 1:30 p.m. from its IPO price of NT$168 a share. The company sold 14.25 million new shares to the public and employees, raising NT$2.39 billion ($79 million), Michelle Hsieh, a spokeswoman for the company, said by phone today.

“Investors are pinning hopes on the company’s expansion in the China market,” Tu Jin-lung, chairman of Grand Cathay Investment Services Corp., said in a phone interview today. " "People believe in these China leads and they are eager to jump on the bandwagon."

The restaurant operator will use the proceeds of its IPO to increase its Chinese outlets more than sixfold to 1,000, challenging Starbucks Corp. in the fastest-growing major economy, Chairman Wu Cheng-Hsueh said on Nov. 8. Coffee-chain operators are expanding in China, which Starbucks predicts will be its biggest growth market in two years.

Gourmet Master will open stores in cities including Shenzhen, Chengdu and Wuhan in China, aiming to reach its expansion target by 2015, Wu said.

Taiwan IPOs

Its initial share sale is the second-largest on the local bourse so far this year, second only to the NT$6.2 billion raised by TPK Holding Co. last month. TPK also more than doubled on its first day of trading in Taipei and rose 3.9 percent to NT$566 today, compared with its IPO price of NT$220.

“The enthusiastic response the new stocks received from the Taiwan market would lure more foreign companies to trade on the local bourse going forward,” Sam Lee, Investment and Corporate Bank chief at Yuanta Securities Co., said in a phone interview today. Yuanta was underwriter for both Gourmet Master and TPK.

Jih Sun Securities Investment Consulting Co. set an estimated price forecast for Gourmet Master of NT$240 on its China expansion plans and estimated earnings of NT$8.97 per share in 2011.

Gourmet Master’s IPO price of NT$168 gave it an estimated price-to-earnings ratio of 18.7, using Jih Sun’s estimates. That compares with a current price-to-earnings ratio of 39 for Starbucks Coffee Japan Ltd. and 38 for Ajisen China Holdings Ltd., which operates fast-food restaurants in Hong Kong and mainland China.

Cheaper Than Starbucks

Gourmet Master has 325 stores in Taiwan, of which 41 are wholly owned, compared with 231 directly owned outlets for closely held President Starbucks Coffee Corp., a joint venture established in 1998 between the world’s biggest coffee-shop chain and Uni-President Enterprises Corp. and President Chain Store Corp. President Starbucks has said it aims to have 235 stores in Taiwan by the end of the year.

Gourmet Master’s 85C outlets sell a 16-ounce serving of latte for NT$65 ($2.15) compared with NT$110 at Starbucks. Gourmet Master offers American coffee for NT$50 for a 16-ounce serving compared with Starbucks’ NT$95 Caffe Americano.

President Chain Store Corp. sells latte for NT$50 at the more than 4,700 7-Eleven stores it operates in Taiwan. Its stock fell 0.4 percent to NT$124.50.

Uni-President Enterprises closed unchanged at NT$41.00 today. The benchmark Taiex Index rose 0.8 percent to 8,374.91. Taiwan allows share prices to rise or fall by a maximum 7 percent per day. Stocks are exempt from the rule for their first five trading sessions.

To contact the reporter responsible for this story: Adela Lin at alin95@bloomberg.net

To contact the editor responsible for this story: Frank Longid at flongid@bloomberg.net

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Gourmet Master to Challenge Starbucks

Maurice Tsai/Bloomberg

Gourmet Master Co. plans to open 1,000 additional shop.

Gourmet Master Co. plans to open 1,000 additional shop. Photographer: Maurice Tsai/Bloomberg