Chow Tai Fook plans IPO, China expansion

HONG KONG (Reuters) - Hong Kong jewelry retailer Chow Tai Fook, controlled by billionaire Cheng Yu-tung, is in the process of selecting banks for its Hong Kong listing, an executive said on Monday, as more global luxury brands seek to raise funds in the Chinese territory.

Hong Kong has drawn a slew of global consumer household names, such as Prada, Samsonite, Coach Inc (COH.N) and L'Occitane International SA (0973.HK), seeking to list and tap the fast-growing greater China market.

"Right now, we are talking to banks. We are still waiting for the banks' proposals," Alan Chan, Chow Tai Fook Jewellery's global branding director, told the Reuters Global Luxury Summit in Hong Kong.

"We only know the process will be long," he said, declining to elaborate further.

On Monday, shares of second-hand handbag retailer Milan Station (1150.HK), which raised $35 million in its IPO, surged by as much as 77 percent versus its IPO price in its trading debut, indicating strong investor demand in luxury goods and related stocks in Hong Kong and China.

In March, local media said banks were aggressively pitching for Chow Tai Fook's IPO, with proposals including a listing to raise funds in yuan and Hong Kong dollars.

IFR, a Thomson Reuters publication, said that the jeweler, which was founded by Cheng's father-in-law Chow Chi Yuen in Guangzhou in 1929, was planning a Hong Kong listing in the second half of 2011 to raise $2 billion to $3 billion.

Chow Tai Fook, which has 1,400 stores mostly in greater China, competes with domestic players, such as Luk Fook Holdings (International) Ltd (0590.HK) and Emperor Watch and Jewelry Ltd (0887.HK), and foreign brands like Tiffany & Co (TIF.N).

"We target to open 200 stores every year, 90 percent of them are in China," Chan said, adding he expected the company's target of opening 2,000 stores by 2020 could be achieved "quite a few years in advance."

"We are planning to open more and more flagship stores (in China with size over 1,000 square meters)," Chan said, adding the company has the biggest flagship store in Beijing, a smaller one in Shanghai, while another one will be opened in Chongqing soon.

Chow Tai Fook, whose name is a combination of its founder's surname and the Chinese words "big fortune," has annual sales of 30 billion yuan from its jewelry business, which focuses mainly on gold, diamonds, jade and platinum.

Chan said the company expected to see its annual sales grow by a third this year, maintaining last year's pace, mainly driven by Chinese demand for precious metals, such as gold, and rising interest in diamond purchases.

"In China its quite interesting. We realize that the gold price keeps going up, but the buying willingness did not fall," he said.

"Gold is one of the favorite items besides the stock market (among investors) because the stock market may not be very good in China and the property market has a kind of policy risk."

(Reporting by Lee Chyen Yee, Donny Kwok and Alison Leung; Editing by Chris Lewis and Hans Peters)