Esprit completes placement

The Hong Kong and London listed retailer raises $80.3 million from a block trade.

Merrill Lynch kept the primary equity markets busy for a second day running in Asia this Wednesday with the completion of a 42.5 million share deal for Esprit Holdings. The majority shareholder Great View International sold down a 3.7% stake in the group at HK$14.70 per share, representing a 4.2% discount to the HK$15.35 close.

Like placements for Sinopec and Yuen Yuen Industrial the previous day, Esprit's transaction has come off the back of a strong share price performance. Year-to-date, the stock is up about 16%, outperforming the Hang Seng Index of which it is a constituent member.

Analysts say this is largely because the group is primarily a European focused retailer and has, therefore, not really been affected by SAR's. With roughly 1,200 franchised shops in 40 countries, Esprit derives roughly 78% of its revenues from Europe, 15% from Asia and the rest split equally between the US and Australia.

Recent first half earnings also beat analysts' expectations, with net income rising 44% to HK$555 million ($71.3 million) over the same period the year before.

Local analysts also argue that the stock should be benchmarked against European retailers such as H&M and Inditex rather than local ones such as Giordano. On this basis, it continues to trade at a discount, returning a current p/e of 17.2 times forecast June 2003 earnings, compared to a 20 to 21 times levels for its European counterparts.

Great View's sale represented 9% of the freefloat and roughly 16 trading days. Pre-deal, 47.6% of shares were in freefloat and 42.71% held by Great View.