Beijing Tong Ren Tang Chinese Medicine Co. more than doubled from the offer price on its first day of trading in Hong Kong amid speculation the seller of traditional drugs and health products will boost profitability.
The shares rose to HK$7.01 at the midday trading break in the city, about 2.3 times the offer price of HK$3.04. The Hong Kong-based company was spun off from Tong Ren Tang Technologies Co., a maker of traditional Chinese medicines.
“Tong Ren Tang is a very strong brand,” Derrick Sun, a health-care analyst at Bank of China International in Hong Kong, said by phone. “Investors should prefer the spinoff to Tong Ren Tang Technologies, as the spinoff might enjoy higher margins and faster growth going forward.”
Demand for Beijing Tong Ren Tang’s offering was expected to be strong because the parent company granted preferential shares to qualified existing stockholders, limiting the stock available to other investors, Sun said.
The preferential offer was 6.45 times oversubscribed, the company said in an e-mailed statement yesterday.
The company is about 40 percent owned by Tong Ren Tang Technologies, according to data compiled by Bloomberg. Beijing Tongrentang Co., a traditional-medicine maker listed in Shanghai, holds a 35 percent stake.