People need shoes come rain or shine. And that may explain why two manufacturers are launching their initial public offerings this week despite a global stock market rout.
Active Group Holdings, one of the largest men's casual footwear manufacturers on the mainland, kicks off its HK$549 million IPO today. This followed the IPO rolled out earlier this week by Hongguo International Holdings, the second-largest mid-to-premium women's footwear manufacturer, which was about three times bigger.
At first glance, the women's footwear firm may appear more attractive than the men's, as the former group is more addicted to purchasing shoes. Retail sales of men's footwear on the mainland were 84.9 billion yuan (HK$103.6 billion) last year, while for women's shoes they were 119.1 billion yuan.
But in terms of profit margins and valuations, Fujian-based Active Group was preferable to Hongguo, said Steve Cheng Ka-wah associate director of Shenyin & Wanguo Securities. 'Active Group has its niche as the first men's footwear company listed in Hong Kong and it has higher profit margins and a lower valuation,' he said. 'When the market is plunging and many big state-owned firms or blue chips are at bargain prices IPOs have to be more practical in pricing.'
Active Group priced its shares from HK$1.20 to HK$1.83 apiece, which translates to 10.9 to 16.6 times its earnings this year, while Hongguo is at 13.5 to 19 times earnings.
Sources said yesterday the institutional tranche for Active Group, accounting for 90 per cent of total offered shares, had been fully covered.