Shoe King BELLE Will Divest Sports Business Again In Hongkong?

Or will BELLE be optimistic about its split listing?

Tuesday,

It is said that China's largest fashion retailer and Belle International Holdings Ltd. Belle International Holdings Ltd, the largest shoe manufacturer, will be stripped of its sports business next year and will be listed again in Hongkong as early as.

Bloomberg quoted sources as saying that last year, after the holding of HK $53 billion 100 million valuation of BELLE holdings, its existing major shareholder Hillhouse Capital high Ling capital and CDH Investments CDH investment are considering the group's sports business split, the first to be listed in Hong Kong next year, raising $1 billion.

Tang Xiaotang, founder of No Agency, an industry research and consulting investment organization, said it was expected that the sports business IPO would be split.

At the beginning of last year, when Tang Xiaotang commented on BELLE holdings privatization paction, he said that splitting sports business listing would be the first step of BELLE holdings.

But he had previously predicted that private equity shareholders would be more patient and put the deal in A shares.

At the beginning of 2017, BELLE holdings received the offer from the executive director of the management and the privatization of the high and medium level private placement funds, and the total investment was HK $45 billion 311 million 400 thousand, or about US $6 billion 800 million.

After the paction was approved, the high leverage capital held 56.81% of BELLE holdings, while CDH investment held 12.06%, holding 31.13% of its management shares in the group and the group, while BELLE holdings closed from the Hongkong stock exchange in the middle of last year.

In analyzing the possible split of IPO, Tang Xiaotang said, "A shares are more stringent and the growth of China's retail market is slowing down, which may allow private equity funds to consider early capital recovery."

According to the existing A share rules, the company's public offering requires at least three natural years to run, while sports business is still affiliated with BELLE holdings last year.

The time node of sports business rumors is also notable. When BELLE holdings maintained its listing status, its annual disclosure date was usually in mid May, because the fiscal year of the company was -3 October, coincidentally, the last annual report of BELLE holdings was also released in May 15th.

Zhang Lei, founder of BELLE International's largest shareholder, Gao Ling capital

Tang Xiao Tang is not optimistic about the possible split up listing, he said that although BELLE holding sports business can be ranked first among domestic capital by revenue, but the brand control power which is subject to the agency business is weak, and the low margin of agency system and the expansion and large-scale development mode, it is difficult for the pure sports business to get a high valuation in the Hongkong market.

By the end of March 2017, in the 2017 fiscal year, BELLE holdings revenue increased by 2.2%, from RMB 40 billion 790 million 200 thousand yuan (hereinafter referred to as "Yuan") to 41 billion 706 million 500 thousand yuan, of which 15.4% of the increase in sports and clothing business revenue offset the decline in the income of footwear brand 10%.

In the 2017 fiscal year, group sports and apparel business earned 22 billion 746 million 500 thousand yuan in revenue for the first time, exceeding the footwear business 18 billion 960 million yuan, accounting for 54.5% and 45.5% respectively, while in the 2016 fiscal year, group footwear business accounted for 51.7%.

Although in the BELLE holding group, with the healthy trend of the Chinese market in recent years, the sports business revenue has exceeded the traditional shoes, but in the Chinese sports market, BELLE holding sports business does not have any unilateral leading edge.

BELLE

The president of the division and President of the new business department said that the profit and sales of group sports business in the 2018 fiscal year are expected to exceed 20%.

If calculated on the basis of 20%, sports business revenue last year was about 27 billion 300 million yuan, while profit was estimated to be about 1 billion 300 million yuan based on No Agency.

From the point of view of revenue, BELLE holding sports business income is not as good as Nike Inc. (NYSE:NKE) Nike group, ranking second in the Greater China market, more than Adidas AG (ADS.DE), Adidas group, Nike and Adidas 2017 Greater China.

Revenues were about $4 billion 200 million (up to the end of May 2017 fiscal year) and 2 billion 800 million euros (up to the end of fiscal year 2017). From the perspective of the whole industry, it is not as good as Pou Sheng International (Holdings) Ltd. (3813.HK) Baosheng International Holdings Limited, which has the world's first sports shoe manufacturer Yue Yuen Industrial (Holdings) Industrial (Holdings) Yuyuan Industrial (Group) Co., Ltd. as the controlling shareholder; from the profitability aspect, BELLE holding sports business is inferior to the local sports giant (Anta Sports Products Limited), the Fujian company has a net profit of 3 billion 87 million 800 thousand yuan in 2017, which is two times the BELLE holding sports business.

"In view of BELLE's previous performance in Hong Kong stocks, investors are afraid that it is difficult to give it more than 20 times the P/E valuation," Tang Xiaotang said. "The resolution is probably just a market test."

At present, the price earnings ratio of Anta sports and Li Ning Co Ltd (2331.HK) listed on Hong Kong stocks is about 32 times, while Baosheng international, which is closest to BELLE holding sports business, is only about 16 times P/E.

According to Bloomberg quoted sources, the consideration of splitting Hong Kong shares in sports business is still at a preliminary stage, and shareholders, including management, may oppose the proposal.

However, Tang Xiaotang said that the two major businesses of BELLE holdings will be split in the future. If there are no accidents, they are the ideal choice. When choosing when and where to make the stock offering, I believe it is the suspense part.