Miniso shares slump on plans to buy stake in Yonghui Superstores

People walk past a store of Chinese retailer MINISO Group in Beijing, China September 13, 2021. Picture taken September 13, 2021. (Reuters/Tingshu Wang/File Photo)

 Shares of Miniso Group Holding 9896.HK plunged as much as 39.2% to HK$20 ($2.57) on Tuesday after the company said it would take a stake in embattled Chinese supermarket operator Yonghui Superstores 601933.SS.

The lifestyle products retailer’s shares plunged to their lowest level since December 2022 in their biggest one-day percentage drop since their debut in July 2022.

The stock ended down 23.9% at HK$25.05, its lowest close since January 2023, and was the second biggest percentage loser on the Hong Kong bourse. The benchmark Hang Seng Index .HSI rose by 4.1%.

Miniso’s U.S.-listed shares MNSO.N fell 16.6% on Monday.

Miniso said it would take a 29.4% stake in Yonghui for 6.3 billion yuan ($893.1 million), buying shares from units of Singapore-listed DFI Retail Group DFIR.SI and Chinese e-commerce giant JD.com 9618.HK at 2.35 yuan ($0.33) apiece, or a 3.1% premium to Yonghui’s closing price on Sept. 20.

Nomura, which has a “buy” rating on Miniso, said the sudden acquisition of Yonghui brings notable uncertainties with no immediate synergy and the bold move may be too aggressive.

Shares of Yonghui listed in Shanghai jumped 10.2% to 2.48 yuan, the highest since Aug. 12.

Yonghui has logged three years of net losses, reflecting mounting costs of closing stores.

“We are slightly doubtful about the timing and the scale,” CMB International wrote in a research note. “Using up 95%+ of its cash to buy an asset that is not profitable in the past 3 years does not look attractive at all financially, especially when the macro environment is still rather unclear.”

($1 = 7.7891 Hong Kong dollars)

($1 = 7.0569 Chinese yuan renminbi)

 —Reporting by Hong Kong newsroom; Editing by Christian Schmollinger and Stephen Coates

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