Jicheng Umbrella weaves magic over HK stock market

April 27, 2015 16:31
The Umbrella Movement may be over, but Jicheng Umbrella is having its day in the sun. Photo: HKEJ

The pro-democracy Umbrella Movement may be over, but the impact of umbrellas on the Hong Kong stock market is way beyond expectations.

Forget Alibaba or Tencent: Jicheng Umbrella (01027.HK), a tiny umbrella manufacturer from southeastern China's Fujian province, is achieving something that not any of the 1,600 companies on the local bourse has done.

Ten weeks into listing, Jicheng shares were up 20 times, an amazing run that probably could only be explained by the hot streak the Hong Kong market is currently experiencing.

On Monday Jicheng reached a high of HK$22.0, compared with its IPO price of HK$1.1 on Feb. 13. At HK$20, the stock's price-earnings multiple is over 100 times.

The company's pre-IPO marketing came amidst the Occupy protests of which the yellow umbrella has become a ubiquitous symbol. 

But just as the streets protests for genuine universal suffrage in the city died down, investor interest in the umbrella company also dissipated. The IPO was only 1.7 times subscribed with a total of 422 investors.

At its trading debut, the stock surged 56 percent to close at HK$1.72. The share price remained below HK$2 in the last 28 trading days.

But just as the Hang Seng Index resurrected after Easter, so did Jicheng. Since April, Jicheng was up for eight consecutive trading days with daily gains last week all exceeding HK$1.1, its IPO price.

Last week, the company issued an announcement regarding its unusual share price movement and confirmed it was in initial talks to distribute a consumer product.

It did not say what the product was, but we reckon even Apple's iPhone may not weave that kind of magic for Jicheng.

Interestingly, no broker could come up with a good enough reason for the stellar performance.

OK, it's China's largest umbrella exporter, and therefore a leader in a highly fragmented market.

But that could hardly explain its transformation from a US$500 million company into a HK$9.5 billion giant. Just to give you an idea of the magnitude of this figure, it is roughly the same as the market capitalization of all print media firms listed in Hong Kong.

EJ Insight readers may recall we told you to watch out for this stock through a Christmas carol:

You better watch out

You better not cry

Better not pout

I’m telling you why

The Umbrella IPO is coming to town.

That is magic!

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EJ Insight writer