Sincere times IPO

Singapore''s Sincere Watches spins off Hong Kong unit to fund China expansion.
Singapore’s Sincere Watch Limited (SWL) will spin off its Hong Kong unit and list the subsidiary on the main board of the Hong Kong Stock Exchange. Sincere Watch (Hong Kong) Limited (SWHK), the long-term exclusive distributor of the Franck Muller brand locally, will attempt to raise between HK$79 million to HK$107 million from the main board listing to fund brand recognition and its push into the Mainland China market. The listing entails an offer of 102 million new shares, of which 91.8 million are designated for private placement. The remaining 10.2 million will be offered directly to the public. Running from 30 September to 5 October, the public offer is based on an indicative price range between HK$.90 and HK$1.18 per share. The company has a historical P/E ratio of 7.0-9.2 times and its market capitalization is expected to clock in between HK$367 million and $481 million. The newly merged CIMB-GK Securities (HK) is acting as bookrunner and lead manager. Tai Fook Securities and CIMB-GK Securities (HK) are both acting as joint sponsor. The IPO is timely for Sincere Watch (HK), which has witnessed a significant increase in Swiss watch sales in the region. According to the parent company, Hong Kong is the second largest importer of Swiss watches outside the US and now stands on the doorstep of the burgeoning China market, which is presently the world’s 11th largest importer and the fastest growing market for quality timepieces. Since 2002, China’s share of the Asian luxury Swiss watch market has expanded from 0.9% of total imports to 2.4% at the conclusion of 2004. The proceeds of the IPO will leverage off the growing interest of Chinese consumers for luxury watch brands such as Franck Muller, with an estimated HK$57.6 million of the total sale destined to brand building programs in China. The remaining proceeds will be used by Sincere Watch (HK) to expand and develop its distribution network, for marketing of new brands and general working capital. Currently, China accounts for roughly 1.0% of Sincere Watch’s regional CAGR in 2005, which stands in stark contrast to 0.1% registered in 2004. Net profit for the Singapore parent chimed in at HK$52.15 million for the year ended 31 March, which is almost double the figure generated in 2003. The allotment results will be announced on 13 October, while the shares are expected to make their trading debut on 16 October.