Restaurant chain operator South Beauty Group has applied to list in Hong Kong, and plans to raise $300-$400 million from its initial public offering, reports Oriental Morning Post.

According to an industry analyst, listing in Hong Kong is not in line with the company's strategic development. Instead, it fits the interests of main investor CDH Investment.

South Beauty Group runs the Qiaojiangnan, LAN Club and SUBU chains.

According to Hong Kong media reports, South Beauty Group has appointed UBS and Piper Jaffray to handle its initial public offering, and is planning to list in the second quarter of 2012.

A source close to the company said South Beauty Group has difficulties in cash flow.

Company chairman Zhang Lan said South Beauty Group plans to open 300-500 outlets over the next three to five years.

According to the report, the company only opened 11 outlets in 2011. By the end of 2011, it operated a total of 57 outlets across China.

Gao Jianfeng, general manager of BOGO Consultants, said the company's business model requires it to expand rapidly in order to maintain its leadership position, a practice that is highly reliant on capital.