Entertainment> Style

China shoe retailer Belle debut lags forecasts

(Reuters)
2007-05-23 19:46

HONG KONG - Shares in China's top women's shoe retailer, Belle International Holdings , rose a less-than-expected 31 percent after its US$1.1 billion share sale attracted record demand from Hong Kong's retail investors.

Belle, which sells its own Belle, Staccato and Teenmix brands as well as licensed brands Bata and Joy & Peace for about US$39 to US$260 a pair, was crimped by a weak overall market and an IPO price that was at a premium to some of its peers.

A woman walks past an advertisement of 'Staccato', where Belle sells shoes under its own brands,
in Hong Kong May 23, 2007. [Reuters]

Belle shares closed at HK$8.14 on Wednesday, compared with an IPO price of HK$6.20, and were the day's most actively traded counter in Hong Kong.

Market players had expected a gain of roughly 40 percent.

"Even though the result is a little disappointing, I think the price at this level is still quite high," said Castor Pang, strategist at SHK Financial in Hong Kong.

The stock's peak gain on the day was 36.3 percent. The Hang Seng Index ended 0.22 percent weaker, while the H-share index of mainland Chinese companies listed in Hong Kong rose 0.33 percent.

Belle priced its IPO at the top of an indicated range after the issue generated record retail orders worth US$57.3 billion -- more than 516 times the number of shares initially earmarked for individual investors in Hong Kong.

"It's below the grey market price," said Steven Leung, director at UOB Kay Hian Holdings, who said the shares could climb to HK$8.60-HK$8.70 in the medium term.

"The current range is undervalued. Retail consumption is still strong in China," he added.

The company operates more than 3,700 outlets in mainland China, with a market share of about 8.2 percent, as well as 35 stores in Hong Kong, Macau and the United States. It will use its IPO proceeds to help it open about 1,000 outlets per year.

Belle sold 1.4 billion shares, or 17 percent of its enlarged share capital, in an IPO that gave it a market value of about US$6.5 billion.

The deal valued Belle at 31.3 to 32 times forecast 2007 earnings, compared with mainland shoemaker Prime Success International Group's 24.4 times. Top mainland sportswear retailer Li Ning trades at 39.7 times this year's forecast earnings.

U.S. retailer Jones Apparel Group Inc. trades at 15 times forecast earnings, while top Italian shoe maker Geox trades at 26 times forecast profits.

Investors have crowded into stocks that give them exposure to surging domestic demand in China, where retail sales rose by 15.5 percent in April from a year earlier.

More China-related consumer IPOs are in the pipeline, including listings planned by sportswear maker and distributor Anta, as well as by casual footwear retailer Walker Group.

The family of French billionaire Bernard Arnault, chairman of luxury goods group LVMH Moet Hennessy Louis Vuitton , took a US$30 million stake in the company's IPO.

Credit Suisse and Morgan Stanley underwrote Belle's IPO. (US$=HK$7.8) (Additional reporting by Rita Chang)