Menswear firm China Fordoo Holdings raised $60.4 million on Thursday after selling 120 million shares above the midpoint in its Hong Kong initial public offering.
The pricing – at HK$3.90 per unit – was in the middle of an indicative HK$3.35 to HK$4.40 range and represents 25% of the enlarged share capital, valuing the company at $241.5 million, according to a term sheet. The shares sold are all primary.
Both the institutional and retail books experienced single-digit oversubscription, not enough to trigger the clawback, a banker close to the deal told FinanceAsia.
The institutional tranche was primarily made up of long-only institutional investors and corporates, the majority located in Asia. As a Reg-S offering, no US investors participated.
The company is trading at 5.6 times its 2014 earnings and 4.6 times its 2015 earnings, a discount to its peers, and ultimately the reason the issuer was able to price the shares in the middle of the range, a banker close to the deal told FinanceAsia. China Fordoo was initially marketed at 4.8 to 6.3 times 2014 earnings and 4.0 to 5.2 times 2015 earnings.
Comparables
Shanghai-based China Outfitters and Hong Kong firm Cabbeen Fashion are currently trading at 8 times and 7 times 2014 earnings, respectively. The company’s other comps, Fujian province-based China Lilang and Quanzhou-based Fujian Nuorqi, are both trading at 9 times 2014 earnings.
Performance for the clothing companies is mixed this year, with shares in the four companies up between 5% and 10%, Bloomberg data show.
“It’s a quality company ... and shows promising growth,” the banker said on China Fordoo. “When compared to its [peers], it came at a discount and allowed us to move [the shares] to the middle of the price range."
China Fordoo’s differentiator — its focus on casual menswear — also resonated well with investors. The company had a 2.9% share of the upper-middle menswear market in China as of 2013, which accounts for a little under a third of the country’s overall menswear market, according to Frost & Sullivan, leaving plenty of room for growth.
IPO proceeds will go towards branding promotion, marketing, research, design and product development, repaying loans, expanding its distribution network, and improving storefront decoration.
Barclays was the sole sponsor and global coordinator, and also handled joint bookrunning responsibilities with CCB International. DBS acted as lead manager on the deal.
IPO markets
China Fordoo’s listing comes after a handful of other Chinese companies have sought to tap capital markets.
While not direct comparables, Cosmo Lady, a Chinese lingerie manufacturer, and high-end women’s fashion designer Koradior Holdings, sold shares in the middle of their indicative price ranges, similar to China Fordoo.
Meanwhile, Luye Pharma Gropu and social video platform operator Tian Ge Interactive Holdings priced at the top of their indicative ranges, while Beijing Digital Telecom, one of China’s largest mobile handset and digital product store chains, and Beijing Urban Construction Design & Development Group, wound up pricing at the bottom.
