2009-06-22

361 Degrees IPO

JLM Pacific Epoch has the news:
The Hong Kong Exchange said the company plans to issue 500 million shares and public trading will commence on June 30. Of the HK$1.74 billion, 361 Degrees plans to use 39% on advertising and sponsorship, 32% for its Fujian factories and the remainder for research and development and operating capital.

The company has 5,900 retail outlets across 31 provinces in China, and plans to expand to 6900 by next June with 25 flagship stores. In addition, 361 Degrees plans to enter the children- clothing business in 2010 and expects to become profitable within one or two years, said the report.
My 361 Degrees sneakers have survived 5 years of wear and tear. Here's the company's homepage: 361 Degrees.

Chinese traditional medicine shampoo manufacturer, BaWang, is also set to IPO. From FinanceAsia:
Bawang's IPO consists of 700 million primary shares, or 25% of the company, which are offered at a price between HK$1.95 and HK$2.38 apiece. This gives a total deal size of between HK$1.37 billion and HK$1.67 billion. A standard 15% greenshoe applies, which, if exercised, will inject another 105 million shares into the IPO, increasing the maximum size of the deal to $247 million.

The price range values the company, on a pre-shoe basis, at between 14.3 and 17.5 times its estimated 2009 earnings, according to joint bookrunner numbers. On a post-shoe basis, the valuation increases to between 14.8 and 18.1 times 2009 earnings, based on joint bookrunner numbers.

This makes Bawang somewhat cheaper than its comparables. Since there are no other shampoo manufacturers listed in Hong Kong, investors are looking at companies that make similar products, or other asset light distributors of branded products. In the first category, the most obvious candidate is Hengan International, China's leading personal hygiene company, which is trading at around 22 times 2009 estimated earnings. In the second category, there is sportswear company Li Ning, which is trading at around 20 times 2009 estimated earnings.

Bawang is positioned in a market dominated by foreign brands. Proctor and Gamble (P&G) has a 39% share of China's shampoo sales, much more than Bawang's 7.6%. Within the niche herbal shampoo sector though, Bawang comes out top with a 36% market share.

"The shampoo market will continue to grow steadily... even under a relatively unfavourable economic downturn, as a result of its necessity nature," said Michelle Huang, a Shanghai-based senior analyst at consultancy Euromonitor International.

Huang said that continued growth in shampoo usage is driven by a range of factors. One such factor is product innovation: Bawang's competitors, even the leading players, are developing herbal products. This year, for example, P&G started a line of herbal products under its Rejoice brand. Another major factor is the male market segment, since men have contributed more to the recent increase in shampoo usage than women.
361 Degrees will trade under the symbol 1361, BaWang (霸王) under the symbol 1338.

I like the consumer angle of these stocks, but I'd like to see prices fall from the IPO before I buy. These two will get a once over as I prepare my shopping list.

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