Sitoy execs sell shares to boost liquidity

The luxury bag manufacturer, which boasts high-end retail clients such as Prada, held a secondary share offering that met with strong institutional investor demand.
Sitoy Group makes bags and other leather goods for Prada
Sitoy Group makes bags and other leather goods for Prada

Sitoy Group Holding’s top executives sold 80 million shares in the Hong Kong-based luxury bag maker on Thursday to help boost the stock's liquidity, raising some $52 million in the process.

Chairman Yeung Michael Wah Keung and CEO Yeung Wo Fai sold 52 million shares and 28 million shares, respectively, at HK$4.95 a share, which was at the low end of the initial pricing range and represented a 10% discount to the March 5 closing price of HK$5.50. The lockup period is 180 days, according to a term sheet.

Books for the secondary share offering opened Wednesday night with shares initially offered at between HK$4.95 and HK$5.06.

A banker on the deal told FinanceAsia that trading volumes in Sitoy shares had been low from the time the company floated in 2011. “It’s a well-held stock with a sticky shareholder base. It doesn’t turn over much. So it’s always been dogged with low liquidity,” he said. 

Brothers Yeung Wah and Yeung Wo remain the controlling shareholders in the company, with each holding 486.7 million and 262.1 million shares, respectively, or 74.77% of the total issued equity capital. The newly sold shares represent about 7.99% of the issued shares.

Investors like the company, which manufactures handbags and leather goods for luxury labels such as Italian fashion powerhouse Prada, the banker said, claiming that many were “going nuts because they couldn’t buy it before” due to the lack of liquidity.

The majority of the interest came from long-only institutional investors, although the banker noted some decent hedge fund demand as well. As a Reg S offering, Sitoy shares were only available to Asian and European institutions.

Shares dropped 9% on Thursday after the secondary placement but are up 20% so far this year. They fell 10% in 2013.

Sitoy Group reported half-year earnings on February 24, posting a 21% year-on-year revenue increase to approximately HK$2.1 billion ($270.6 million) for the six months ended December 2013 and a 32% jump in profits to HK$250.4 million.

Sitoy Group operates manufacturing facilities with over 200 production lines in the Guangdong province in Dongguan and Yingde. This year it aims to diversify its revenue streams by expanding into manufacturing travel goods, luxury bags and leather goods for men.

The company is also investing in production lines of hard case and handles for its travel goods.

It raised $87 million at its December 2011 listing in Hong Kong, six months after Prada raised $2.1 billion in a June listing.

Bank of America Merrill Lynch acted as bookrunner on the secondary offering.

¬ Haymarket Media Limited. All rights reserved.

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