customContents

entityId

entityUuid

articlePageQuery

filter

article

articleBaseAdvertisingInfoArticle

articleListArticle

articleSeoArticle

helpersCheckIsPostiesArticle

hooksArticleAcknowledgementGateOverlayArticle

hooksTrackPageViewArticle

hooksContentInterestArticle

articleLinkingDataContent

articleSchemaContent

liveArticle

advertZone

sentiment

contentLock

topics

types

sections

moreOnThisArticles

urlAlias

commentCount

sponsorType

authorLocations

authors

paywallTypes

corrections

displaySlideShow

multimediaEmbed

printHeadline

seriesContainer

socialHeadline

headline

flag

firstTopic

glossary

flattenTypeIds

publishedDate

additionalInfoBoxes

images

image

relatedLinks

relatedNewsletters

__typename

createdDate

sponsor

factSheets

series

knowledgeQuestion

disableOffPlatformContent

published

updatedDate

summary

subHeadline

body

keywords

copyrighted

customTimezone

liveContents

Andy Chen

Investors may find it tough to evaluate listing candidate Bosideng International Holdings, a mainland maker of down coats, as no other Hong Kong-listed companies are comparable in terms of business nature, according to analysts.
Ruling out a match-up  in terms of price/earnings ratios, they say the next best thing is to consider Bosideng as a consumer play and use gross  margins to evaluate its self-branded business.
The company, based in Changsu, Jiangsu province, and headed by chairman and chief executive Gao Dekang, plans to raise as much as HK$6.53 billion in  an initial public offering in Hong Kong this month to fund expansion and repay bank loans.
Bosideng's gross  margin for its branded products, at 43.1 per cent in its past financial year, was good, analysts said. That compares with 33.5 per cent at domestic sportswear maker Anta Sports Products and 48.7 per cent at its rival Li Ning for the six months to June.
Bosideng is selling 1.988 billion shares at between HK$2.56 and HK$3.28 each, according to a term sheet sent by one of the bookrunners. Goldman Sachs and Morgan Stanley are arranging the sale.
Of the shares in the offering, 94 per cent are new, with the rest being sold by Olympics Investment, an investment arm of HSBC Private Equity, which  is cutting its stake  to 7.83 per cent from 12.24 per cent. Pricing will be fixed on October 3  and trading will start  on October 11.
Bosideng sells down jackets under the brand names Bosideng, Snow Flying, Kangbo, Bingjie, Bingfei, and Tianyu. The company also exports some of its products to countries in Asia, North America, and Europe.
The company's uniqueness lies is its reliance on winter coats, demand for which depends very much on the severity and duration of winters. As global warming looks set to become more serious, some have warned that sales could be difficult to grow in the long run.
Weather-dependence set Bosideng apart from many other consumer stocks that in general received a good response to their share sales and created  uncertainty over the company's prospects, said Patrick Yiu Ho-yin, an associate director at Cash Asset Management.
Chan Yuk-keung, a fund manager at Phillip Asset Management,  was concerned  about hygiene issues, especially the risk that stock-related diseases such as avian influenza could seriously  hurt sales, as the principal raw material for Bosideng's products, feathers, came from  birds, such as geese.
Bosideng said it intended to diversify its apparel business to reduce its reliance on down-related products.
The company, which increased net profit 23.3 per cent to 617.59 million yuan in the year  to March,  forecast net income would be not less than 950 million yuan or 12.1 fen a share for the year  to March  next year.
Sales rose 52.3 per cent to 5.632 billion yuan for the year to last March as Bosideng, which claims to have about 36 per cent of  the country's down apparel market in terms of revenue, doubled the number of its retail outlets in the period to 6,884,  mostly in the central and northwestern  regions.The company will use between 15 per cent and 20 per cent of the  share sale proceeds to expand its retail network,  and between 30 per cent and 40 per cent  to fund expansion of product categories at home and overseas through acquisitions and joint ventures.
As much as 30 per cent of the proceeds will be used to repay 1.25 billion yuan of  loans from Bank of Communications, HSBC, DBS Bank (HK), Bank of Ningbao and Xiamen International Bank.
The  balance will be used for developing information technology systems, brand building and as general working capital.
The company said it did not own any  factories and outsourced the manufacturing of both its branded products and  those of other brands.
Its own-brand down apparel  accounted for 88.4 per cent of  sales in the year to last March, with the rest coming from products made for other companies.
Not owning  factories was a plus for Bosideng because the company could concentrate  on brand building, said Francis Lun Sheung-nim, a general manager at Fulbright Securities.
'Brand building is most profitable for consumer products, just as for mainland sports brand Li Ning,' he said.
The company said it paid 240,460 yuan for a tonne of down apparel from suppliers for the year  to March, compared with 242,810 yuan a year ago. Fabric cost the company 10.92 yuan per metre for the year  to March, up from 10.53 yuan a year earlier.
'Fabric prices may be affected by crude oil prices as crude oil is a primary raw material of fabric [manufacturing],' the company said in its prospectus.
The company intends to pay out not less than 30 per cent of its earnings as dividend every year.
What the analysts think
Patrick Yiu,
associate director, CASH Asset Management
Pros: Consumer stocks usually receive good response
Cons: Bosideng's sales highly dependent on  winter temperatures
Chan Yuk-keung,
fund manager, Phillip Asset Management
Pros: Bosideng is a  unique concept and  a market leader
Cons: An outbreak of avian influenza could seriously drag down sales as Bosideng's  principal raw material comes from stock such as goose
Francis Lun,
general manager, Fulbright Securities
Pros: Not owning production facilities was a plus for Bosideng because the company could concentrate its energy in brand building
Cons: Down apparel is seasonal and   global warming is becoming more serious



Climate change, bird flu raise valuation hurdles as Bosideng comes to market