Goldman places Esprit stock at 2.9% discount

The small-size placement is done at a tight discount as stock moves off record highs.
An unidentified institutional shareholder last night sold HK$1.02 billion ($131 million) worth of shares in Esprit Holdings, the second placement in the fashion retailer in less than four months.

The sale came on a day when EspritÆs share price turned higher again after six days of mainly declines and could suggest that more shareholders are getting nervous about the current weakness in the market and are taking the opportunity to secure some profit on days of strength. This was the third sell-down by institutional investors in a Hong Kong-listed stock this year after placements in mobile operator Hutchison Telecommunications International and Chinese property developer Hopson Development last week.

Esprit hit an all time closing high of HK$89.50 on January 2 and has rallied 41% in the past five months, making it an opportune time to sell.

The Hang Seng Index shed another 0.9% Thursday, extending its losses over the past four days to 4.1%. The Hong Kong benchmark closed at a record 20,211 points last Friday after gaining strongly in the final weeks of last year and most market watchers say the correction is warranted and will be healthy for the market in the long run.

YesterdayÆs sale, which was arranged by Goldman Sachs, comprised 12.9 million shares, which were sold at HK$79.10, or a tight discount of 2.9% versus the closing price of HK$81.50. The price was fixed towards the bottom of the offered range of HK$79 to HK$79.50, which represented a discount of 2.45% to 3.07% against the close.

People close to the transaction said demand had been reasonable and the offer was close to two times covered with about 50 investors participating. Interest was said to have been fairly balanced among Asian, US, and European accounts.

Investors like Esprit for its strong earnings growth, and in the past few months the stock has also been underpinned by the strengthening of the euro. The company gets 85% of its revenue from Europe with Germany being its largest individual market.

The company posted a 16.4% increase in net profit for the year ending in June 2006 to a record HK$3.74 billion.

Historically the stock has also performed well in the wake of frequent share placements, which has seen former Chairman Michael Ying cut his stake in the company six times since May 2003. Many of those sell-downs have taken place at times of record high share prices and have also been much more sizeable than this latest one, which accounted for only 1.05% of the outstanding share capital.

Since the most recent placement in September, when Ying sold half his remaining stake or $755 million worth of stock, the share price has risen 18%. That sale was done at HK$69 per share or at a 4.2% discount to the then market price.
¬ Haymarket Media Limited. All rights reserved.
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