SHANGHAI - Shanghai Yaoji Playing Card Co Ltd soared 71.71 percent to close at 36.06 yuan ($5.60) a share on its first trading day after listing on Shenzhen's growth enterprise board (ChiNext), China's version of the Nasdaq.

The huge success of its initial public offering (IPO) will help the poker-card maker add capacity to produce 1.3 billion decks of cards annually, or one pack for every Chinese person, said analysts.

Prior to the IPO, Yaoji said it planned to raise 363 million yuan through the issue of 23.5 million A-shares to fund a manufacturing base with an annual capacity of 600 million decks.

Yaoji's total production capacity will expand to 1.3 billion decks from the current 700 million when the new project is finished within the next two years.

As the nation's leading maker of poker cards, Yaoji's sales reached 532 million decks in 2009 with a growth rate of 29.8 percent and 669 million in 2010, rising by 25.7 percent year-on-year, much higher than the industry's average annual rate of increase of 18.8 percent, said Zhu Chenghui, an analyst at Xiangcai Securities Co Ltd

Yao Wenchen, chairman and founder of Yaoji, started in the poker-card business in 1982. Initially, he sold cards as a domestic wholesaler, and four years later he became an export agent for the manufacturers.

"I was impressed by the huge success of the US-based "Bee" brand in the Chinese mainland. Because of their high quality, the cards swept the domestic market. At that time, I became determined to produce a famous brand of my own," Yao was quoted by the China Business Times.

In 1994, the Guangdong native arrived in Shanghai and took over a factory on the verge of closing down. In less than five years, Yao had not only turned the factory's fortunes around, but had also begun exporting his products to the US market.

In 2010, Yaoji produced 700 million decks of cards, taking 14 percent of the domestic market, said Wang Xudong, an analyst at China Merchants Securities.

A survey conducted by the company shows that sales of poker cards in China have soared at an annual growth rate of 18.8 percent in the past five years, and demand for high-end cards will continue to rise as consumers spend more on games.

However, Yaoji is facing a saturated market because every Chinese person owns an average of three decks of cards. In addition, entertainment choices are diversifying rapidly, analysts said. "To be honest, the poker-card production industry lacks further growth potential. Although shares of Yaoji gained so much today, there will be little space for the stock to surge further," said an industrial analyst who spoke on condition of anonymity.

According to him, about 50 percent of the market is dominated by the top six manufacturers, leaving more than 100 companies sharing the rest.

China Daily

(China Daily 08/06/2011 page9)