CK Dealer Shang Jin International Listing Plan To Raise HK $200 Million -2.5 Billion

According to IPO, as early as the news, fashion apparel retail companies Shang Jin International Holdings submitted the main board listing application to HKEx on 5 August.

IPO knew early that the amount of the IPO listing raised was about 200 million to HK $250 million, which was estimated at 7-10 times PE valuations. The market value of Shanxi International was about 8 to 1 billion Hong Kong dollars.

Founded in 2005, Shang Jin International Holdings mainly engaged in international fashion fashion retailing in the Greater China region (mainland, Macao, Hongkong and Taiwan) through multi brand and multi store business models. Among them, the more famous designer brands include CK CALVIN KLEIN, Calvin Klein Jeans, Moschino, Neil Barrett, Philipp Plein, Barrett and so on.

At present, Shang Jin International operates 225 self operated retail outlets in the Greater China region, including 196 single brand shops and 29 multi brand stores. Its distribution brands are 109, including 106 international brands and three proprietary brands. There are also outlets for online stores and store management and consignment services.

According to the report of frost Sullivan, in 2018, the market share of Shanxi International in the Greater China region ranked first in global retail sales, accounting for 20.4%. Market sales in mainland China, Taiwan, Hongkong and Macao rose to HK $33028, HK $110 billion, HK $74 billion 300 million and HK $17 billion 800 million respectively. The composite annual growth rate of the mainland and Macao between 2013 and 2018 reached 8.8% and 9.5% respectively.

In terms of financial data, Shanxi International has enjoyed steady growth in the past three years, and retail sales have generated 95.3% revenue.

The total revenue in fiscal year 2018 was HK $1 billion 345 million, up 26.2% from HK $1 billion 66 million in the same period last year. Net profit increased to HK $109 million, up 81% from HK $60 million 200 thousand in the same period last year. The growth of revenue mainly came from the number of brands that opened single stores, and the sales area expanded further. Mainland China and Macao accounted for 37.7% and 57.6% of the total revenue respectively.

Among them, sales cost reached HK $610 million in fiscal year 2018, accounting for 45.6% of total revenue. It is mainly composed of the cost of inventory, including the cost of products supplied by suppliers and the impairment caused by unsalable stock.

According to the prospectus, the funds raised will be used to add 51 retail stores, upgrade and refurbish existing stores, develop new brands, strengthen online sales, set up central retail management system and general working capital. And will begin to operate a single brand store for DKNY and Lining's two new brands, and further expand the existing brand portfolio.

But in addition to good performance, Shang Jin is also facing multiple risks. The growth of Shang Jin business depends to a large extent on whether it can manage and expand the retail business network, maintain good cooperative relations with existing brand holders, and expand the brand portfolio to sign new agreements. And the inflow of parallel products and counterfeit products will also affect sales growth.

In terms of cooperation, Shang Jin is not allowed to return clothing. Outdated stock also constitutes a certain risk. The depreciation of goods and the cost of holding will directly affect their profitability, which may lead to Shanxi's price reduction and promotional activities to clean up the over season stocks and greatly reduce its interest rate. This puts forward high requirements for Shang Jin's ability to maintain an appropriate inventory level.

But at the same time, in fashion market, the trend of the wind is changing rapidly, and the demand of consumers is more and more diversified. Changes in fashion trends, customer preferences and brand recognition are all uncontrollable factors. Since Shang Jin made the trend forecast before the next quarter, to judge the demand of different brand clothing products, once the judgment error or trend change, the sales plan, business performance and financial situation will be affected.

Similarly, in May this year, Hong Kong stocks listed on the men's clothing brand GXG parent company mosang group, listed on the first day of the break, the public offering rate is seriously insufficient. Whether the poor performance of the same industry will cause bad mood to the market and affect the progress of the listing is still unknown.