KUALA LUMPUR: China-based shoe manufacturer Xingquan International Sports Holdings Ltd’s CEO Wu Qingquan believes the company can maintain its double-digit growth for FY12 ending June 30.
From 2006 to 2011 the company had chalked up a compound annual growth rate of around 39% for both revenue and net profit.
Xingquan, through its wholly-owned subsidiaries in China, is principally engaged in the manufacturing of shoe soles and shoes, and the sale of shoe soles, shoes, apparel and accessories.
An own brand manufacturer (OBM), its shoes, apparel and accessories are sold under its own brand Gertop in the outdoor casual wear segment in over 2,300 outlets via 31 distributors in 26 provinces in China.
Subsequent to Xingquan’s listing on Bursa Malaysia on July 10, 2009, four more China-based shoe companies were also listed, with the latest being Maxwell International Holdings Bhd on Jan 6 , 2011.
Despite its sound fundamentals, Xingquan — like the other China-based shoe companies listed on Bursa Malaysia — has seen steep declines in its share price due to the negative perception of Chinese companies listed on overseas exchanges.
However, as a result of the double-digit growth and undemanding fundamentals shown by Xinquan and the other China-based shoe companies listed on Bursa, hopefully, investors will have a change of heart, Wu told The Edge Financial Daily.
“The share price is something beyond our control. We will continue to manage the company well; deliver good results and hopefully the share price will take care of itself,” Wu told pressmen after the company’s recent AGM.
It appears investors are starting to take a second look at the sector.
Xingquan rose 3.5 sen to RM1 yesterday, and with Monday’s 1.5 sen rise, its share price has risen 5.3% in the last two days.
On Monday The Edge Financial Daily highlighted in a report the attractive valuations of the five China-based shoe companies.
At the closing price of RM1 yesterday, Xingquan is trading at a 40.8% discount to its end-September book value of RM1.69 and 15.3% below its net cash per share of RM1.18.
Its stock has been battered down by 41.5% from its IPO price of RM1.71.
Wu said Xingquan should be able to main its double-digit growth for FY12 as it has received a 10.7% increase in orders, amounting to 670 million yuan (RM329.64 million), from its 2012 spring/summer sales fair.
Xingquan finished its first quarter of FY12 (ended Sept 30) well, posting a 25.4% increase in net profit to 70.21 million yuan from 56.01 million yuan a year ago, on a 26.8% increase in revenue to 426.3 million yuan from 336.09 million yuan previously.
For FY11, it posted a 16% increase in net profit to 252.29 million yuan from 217.27 million yuan for FY10, while its revenue increased by 22% to 1.497 billion yuan from 1.23 billion yuan previously.
Xingquan’s point of sales (POS) or sales outlets for its Gertop products has increased to 2,382 in FY11 from 409 in FY06.
Wu said the immediate target is to add 200 sales outlets across the 26 provinces in China in FY12.
He said Xingquan does not actually own the outlets, but helps establish them by providing subsidies.
Xingquan will spend about 25 million yuan in subsidies for the 200 new sales outlets, he said.
Wu said Xingquan outsources the manufacturing of its outdoor apparel products. At the moment, Xingquan does not have plans to start its own manufacturing of outdoor apparel products, he said.
For shoe soles, Xingquan has a production capacity of 24 million pairs per annum which will be expanded to around 30 million pairs in FY12, according to Wu.
For shoes, Xingquan’s current production capacity is around six million pairs, he said.
Moving forward, Wu expects its apparel division to be the main driver of revenue.
“People would rather spend more on apparel than on shoes,” he said.
In recent years, Xingquan made a switch in products from outdoor sportswear to outdoor casual wear.
When Xingquan was in the outdoor sportswear market, it was not among the top 10 most popular brands in China, Wu said. But now the Gertop brand (launched in 2010) is among the top three most popular outdoor casual wear brands in China.
Its competitors include Camel, Jeep and Timberland, he said.
“We have first mover advantage in the outdoor casual wear segment,” said Wu, adding that there are not many players in the market.
According to Wu, the outdoor casual wear market is a young industry and has better growth in average selling price (ASP) compared to the outdoor sportswear market.
Xingquan’s ASP for apparel (per piece) has increased 35.4% to 90.3 yuan in FY11 from 66.7 yuan in FY10. Wu said the increase in ASP mainly came from branding initiatives.
Xingquan said the outdoor casual wear market is estimated to be worth at least 27 billion yuan in 2010 based on research by Converging Knowledge Pte Ltd which said this market is expected to grow at an annual growth rate of 30% for 2011 and 2012, and subsequently slow down to 20% in 2013. Based on this growth projection, the market may reach 55 billion yuan by 2013.
Wu said by CY2012, its apparel segment will most likely contribute more revenue than its shoe segment.
In FY11, shoes accounted for most of Xingquan’s revenue (49%), followed by the apparel and accessories segment (33%) and soles (19%). However, for 1QFY12, its apparel and accessories segment contributed 39% to revenue compared to shoes (37%) and soles (24%).
Xingquan did not declare any dividend payment in FY11. For FY12, Wu said dividends will depend on the cashflow position of the company.
This article appeared in The Edge Financial Daily, February 15, 2012.
From 2006 to 2011 the company had chalked up a compound annual growth rate of around 39% for both revenue and net profit.
Xingquan, through its wholly-owned subsidiaries in China, is principally engaged in the manufacturing of shoe soles and shoes, and the sale of shoe soles, shoes, apparel and accessories.
An own brand manufacturer (OBM), its shoes, apparel and accessories are sold under its own brand Gertop in the outdoor casual wear segment in over 2,300 outlets via 31 distributors in 26 provinces in China.
Subsequent to Xingquan’s listing on Bursa Malaysia on July 10, 2009, four more China-based shoe companies were also listed, with the latest being Maxwell International Holdings Bhd on Jan 6 , 2011.
Despite its sound fundamentals, Xingquan — like the other China-based shoe companies listed on Bursa Malaysia — has seen steep declines in its share price due to the negative perception of Chinese companies listed on overseas exchanges.
Wu posing with some of the shoes produced by Xingquan.
However, as a result of the double-digit growth and undemanding fundamentals shown by Xinquan and the other China-based shoe companies listed on Bursa, hopefully, investors will have a change of heart, Wu told The Edge Financial Daily.
“The share price is something beyond our control. We will continue to manage the company well; deliver good results and hopefully the share price will take care of itself,” Wu told pressmen after the company’s recent AGM.
It appears investors are starting to take a second look at the sector.
Xingquan rose 3.5 sen to RM1 yesterday, and with Monday’s 1.5 sen rise, its share price has risen 5.3% in the last two days.
On Monday The Edge Financial Daily highlighted in a report the attractive valuations of the five China-based shoe companies.
At the closing price of RM1 yesterday, Xingquan is trading at a 40.8% discount to its end-September book value of RM1.69 and 15.3% below its net cash per share of RM1.18.
Its stock has been battered down by 41.5% from its IPO price of RM1.71.
Wu said Xingquan should be able to main its double-digit growth for FY12 as it has received a 10.7% increase in orders, amounting to 670 million yuan (RM329.64 million), from its 2012 spring/summer sales fair.
Xingquan finished its first quarter of FY12 (ended Sept 30) well, posting a 25.4% increase in net profit to 70.21 million yuan from 56.01 million yuan a year ago, on a 26.8% increase in revenue to 426.3 million yuan from 336.09 million yuan previously.
For FY11, it posted a 16% increase in net profit to 252.29 million yuan from 217.27 million yuan for FY10, while its revenue increased by 22% to 1.497 billion yuan from 1.23 billion yuan previously.
Xingquan’s point of sales (POS) or sales outlets for its Gertop products has increased to 2,382 in FY11 from 409 in FY06.
Wu said the immediate target is to add 200 sales outlets across the 26 provinces in China in FY12.
He said Xingquan does not actually own the outlets, but helps establish them by providing subsidies.
Xingquan will spend about 25 million yuan in subsidies for the 200 new sales outlets, he said.
Wu said Xingquan outsources the manufacturing of its outdoor apparel products. At the moment, Xingquan does not have plans to start its own manufacturing of outdoor apparel products, he said.
For shoe soles, Xingquan has a production capacity of 24 million pairs per annum which will be expanded to around 30 million pairs in FY12, according to Wu.
For shoes, Xingquan’s current production capacity is around six million pairs, he said.
Moving forward, Wu expects its apparel division to be the main driver of revenue.
“People would rather spend more on apparel than on shoes,” he said.
In recent years, Xingquan made a switch in products from outdoor sportswear to outdoor casual wear.
When Xingquan was in the outdoor sportswear market, it was not among the top 10 most popular brands in China, Wu said. But now the Gertop brand (launched in 2010) is among the top three most popular outdoor casual wear brands in China.
Its competitors include Camel, Jeep and Timberland, he said.
“We have first mover advantage in the outdoor casual wear segment,” said Wu, adding that there are not many players in the market.
According to Wu, the outdoor casual wear market is a young industry and has better growth in average selling price (ASP) compared to the outdoor sportswear market.
Xingquan’s ASP for apparel (per piece) has increased 35.4% to 90.3 yuan in FY11 from 66.7 yuan in FY10. Wu said the increase in ASP mainly came from branding initiatives.
Xingquan said the outdoor casual wear market is estimated to be worth at least 27 billion yuan in 2010 based on research by Converging Knowledge Pte Ltd which said this market is expected to grow at an annual growth rate of 30% for 2011 and 2012, and subsequently slow down to 20% in 2013. Based on this growth projection, the market may reach 55 billion yuan by 2013.
Wu said by CY2012, its apparel segment will most likely contribute more revenue than its shoe segment.
In FY11, shoes accounted for most of Xingquan’s revenue (49%), followed by the apparel and accessories segment (33%) and soles (19%). However, for 1QFY12, its apparel and accessories segment contributed 39% to revenue compared to shoes (37%) and soles (24%).
Xingquan did not declare any dividend payment in FY11. For FY12, Wu said dividends will depend on the cashflow position of the company.
This article appeared in The Edge Financial Daily, February 15, 2012.
