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

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.