* Fu Shou Yuan International Group Ltd seeks to raise $200
* Aging population promises rise in value of graves, revenue
* IPO size is small, but the company has attracted interest
By Elzio Barreto
HONG KONG, Dec 4 When it comes to making a
killing on the Hong Kong IPO market, buying into a cemetery
custodian is not the first strategy which springs to mind.
But in China where tending to the dead can involve vast sums
of money depending on the family's circumstances and appetite
for pomp, one such share sale has piqued the interest of
investors big and small.
According to a term sheet seen by Reuters, Fu Shou Yuan
International Group Ltd is seeking to raise about $200 million
through a listing in Hong Kong as the Shanghai-based death care
company builds more cemeteries in an economy with a rapidly
The initial public offering is a chance for investors to bet
on a rise in the value of graves and in revenue from funerals
and burials, in a country where average income per person in
urban areas has soared in recent years.
Fu Shou Yuan estimates that 180 million of China's 1.4
billion people are over the age of 60, rising to 200 million in
two years' time, said a person familiar with the IPO who
declined to be identified because details are not yet public.
The IPO pales in comparison to Hong Kong's biggest of the
year - the $2.5 billion IPO of China Cinda Asset Management Co
Ltd, to be priced later this week - but has attracted the
attention of global private equity firm Carlyle Group LP.
Carlyle has held talks with Fu Shou Yuan, a Carlyle
spokesman said, declining to comment on whether the U.S. firm
"The (IPO) market is now focusing on companies with a
special business model," said Jasper Chan, corporate finance
officer at Phillip Securities, which offers margin loans for
small investors looking to buy into new listings in Hong Kong.
"This is probably going to be the hot one of the coming
IPOs," said Chan, referring to Fu Shou Yuan.
The company began gauging demand for the IPO on Monday, with
a launch date set for Dec. 9.
Privately owned Fu Shou Yuan will join a small group of
listed companies in the Asia-Pacific region that offer funeral
services or own cemeteries, such as Anxian Yuan China Holdings
Ltd and Midas International Holdings Ltd in
Hong Kong, Lung Yen Life Service Corp in Taiwan and
InvoCare Ltd in Australia.
REAL ESTATE PLAY
China's death care industry was worth 46.5 billion yuan
($7.63 billion) last year and will grow 18 percent a year
through 2017, according to a report by market researcher
Euromonitor. Burial services accounted for about half, product
sales and services covered 25 percent, and funeral and disposal
services made up 20 percent.
Anxian Yuan, in its interim report last month, pointed to
burials as pushing profit. "As the population of China continues
to age and per capita income to increase, the board believes
that there is an upward trend in the demand for cemetery
China's funeral services industry suffers from a limited
supply of new city cemetery land as well as complex regulations.
For investors, Fu Shou Yuan could be a real estate play too,
with the value of grave sites rising 10 percent every year for
the past decade, according local media estimates.
A six-by-six metre plot at Fu Shou Yuan's Shanghai cemetery
can cost as much as 500,000 yuan at the top end, including the
tombstone and other services.
Fu Shou Yuan has six cemeteries, conducts nearly 60 percent
of its business in Shanghai, and is in the process of obtaining
licenses in Beijing and Shenzhen, said a separate person
familiar with the IPO.
The company plans to use 52 percent of the proceeds to
develop new cemeteries, according to the term sheet. It will use
20 percent to buy funeral facilities and cemeteries, 15 percent
to set up new funeral facilities, and 10 percent for working
Citigroup Inc is the sole sponsor and global
coordinator of the offer, the term sheet showed.