(Yicai) Sept. 22 -- The stock price of Pagoda Industrial Group, China’s largest fruit retailer, soared after the firm announced a planned private placement of shares to raise nearly HKD325 million (USD42 million), which will be used to pay liabilities.

After having risen by as much as 33 percent earlier today, Pagoda [HKG: 2411] closed up 20.7 percent at HKD1.75 (23 US cents) per share, giving the Shenzhen-based company a market capitalization of about HKD2.7 billion (USD347.5 million).

Pagoda will issue 279.4 million shares to at least six investors at HKD1.17 apiece, representing about 15.4 percent of its enlarged share capital, the firm said late yesterday. Securities trader First Shanghai Group will act as global coordinator and sole placing agent for the deal.

The placement will raise about HKD325 million after costs, Pagoda said. Around 61.5 percent will be used to settle accounts payable, 30.8 percent to repay bank loans, and 7.7 percent will go to general working capital.

Set up in 2001, Pagoda operates a chain of premium fruit stores but in the past two years its high-end positioning has come under pressure from a weaker economic environment and shifting consumer preferences, pushing the company into sustained losses.

It lost CNY386 million (USD54.26 million) last year, compared with a CNY362 million (USD50.9 million) profit in 2023. Revenue fell 10 percent to CNY10.3 billion (USD1.4 billion). In the first half of this year, it posted a net loss of CNY342 million, with revenue down 22 percent year on year to CNY4.4 billion.

Pagoda’s store count is also shrinking, falling by 966 to 5,127 last year and subsequently dropping to 4,386 at the end of this June.

The company finished optimizing its store network in the first half, and their gross profit margin has returned to a relatively healthy level, management said during an earnings conference on Aug. 22. Confidence among franchisees had also jumped, they said, predicting the number of stores will start to grow again in this half.

Editor: Tom Litting