FAST NEWS: CTG Duty Free replaces auditors

The latest: Duty-free store operator China Tourism Group (CTG) Duty Free Corp. Ltd. (1880.HK; 601888.SH) announced on Monday that it plans to appoint Ernst & Young Hua Ming and Ernst & Young as the company’s domestic and international auditors, respectively, ending its longtime relationships with auditors KPMG and KPMG’s China affiliate.

Looking up: The company pointed out that KPMG was previously its auditor for many years, but that it should consider changing after an appropriate period to ensure independence and objectivity for audit-related matters and good corporate governance.

Take Note: The company’s change of auditors less than 10 months after its Hong Kong IPO may lead some investors to worry whether the move stemmed from a disagreement with the outgoing auditor on the audit process or other internal issues.

Digging Deeper: CTG Duty Free is a leader in China’s duty-free market with roughly 200 shops, and has benefited from the relaxation of duty-free shopping limits on the southern vacation island of Hainan in 2020. The company was first listed in Shanghai in 2009. It raised HK$18.4 billion ($2.34 billion) through a second listing in Hong Kong last August, in the city’s biggest IPO of the year. However, repeated Covid outbreaks and a resulting drop in travel last year caused its revenue and net profit to fall by 19.6% and 47.4%, respectively.

Market Reaction: CTG Duty Free’s Hong Kong shares dropped on Tuesday, closing down 0.6% to HK$122.4 at the midday break, close to its all-time low of HK$120. The stock now trades 22.5% lower than last year’s IPO price of HK$158.

Translation by Jony Ho

To subscribe to Bamboo Works free weekly newsletter, click here