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Monday, October 31, 2016, 23:39

Fashion house stays upbeat as IPO kicks off on a high note

By Duan Ting
Fashion house stays upbeat as IPO kicks off on a high note
Shoppers at a clothing store in Causeway Bay. JNBY — a Hangzhou-based garment maker — kicked off its global share sale in Hong Kong on Monday. Its chief creative officer said they will develop children’s wear as the next step in the company’s development. (Anthony Kwan / Bloomberg)

Defying a sluggish global and regional economic climate, Chinese mainland fashion house JNBY Design Ltd kicked off its share sale in Hong Kong on Monday, confident that its growing popularity on the mainland and sound cash flow would ensure handsome payouts for shareholders.

The Hangzhou-based company made its debut on the Hong Kong Stock Exchange, aiming to raise up to HK$966 million, with a global offering of 125 million shares and 12.5 million shares for Hong Kong investors at HK$6.4 apiece.

Its share price surged a striking 7.34 percent on Monday to close at HK$6.87.

JNBY, founded in 1994 with a view on the appreciation of beauty, had seen its share price in the gray market, where new securities are bought and sold before official trading begins to help issuers and underwriters gauge demand for a new offering, close at HK$6.49 at Phillip Securities last Friday — up 1.4 percent from the offer price of HK$6.4. At Bright Smart Securities, the shares gained 2.97 percent at HK$6.59.

According to the prospectus, the garment maker’s revenue came to 1.9 billion yuan ($280.4 million) for the 2016 fiscal year. Its net income was 239.4 million yuan, with a compound growth rate of 26.3 percent for the last three years.

JNBY, which enjoyed the biggest market share of 9.6 percent among domestic designer brands on the mainland, has cornerstone investor Tianhai International Holdings Ltd subscribing to $15 million of its shares. Tianhai International Holdings also has a stake in Hong Kong-listed intimate-wear maker Regina Miracle International Holdings Ltd. CCB International Capital Ltd is the sole sponsor for the initial public offering.

JNBY Chairman and Chief Executive Officer Ken Wu Jian said he was satisfied with the issuing price and confident about the company’s high dividend payout policy due to its sound cash flow, adding that the JNBY brand is gaining popularity on the mainland.

The growth rates of same-store sales at the retailing end were 7.1 percent and 8.3 percent, respectively, for the 2015 and 2016 fiscal years, despite the lukewarm consumer sentiment on the mainland during the period.

Wu pointed out that the company’s business is driven by design, rather than capital or large expansion. The company will discuss with Hony Capital, which invested $10 million in JNBY, on future cooperation, and will consider teaming up with more shopping malls in Hong Kong, where JNBY has one store at K11 Hong Kong in Tsim Sha Tsui — the world’s first art mall.

As for online sales strategy, Wu said they will keep working on omni-channel interactive platforms and, at the same time, improving consumer experience of physical stores, despite the fact that offline sales have contributed 92.5 percent of the company’s total revenue, according to public data.

Currently, the company has five brands — JNBY, CROQUIS, less and two kid’s collections jnby by JNBY and Pomme de terre.

Li Lin, co-founder and chief creative officer of JNBY, said they will develop children’s wear as the next step in the company’s development.

Growth in the mainland’s children garment industry has shown strong momentum in recent years after the central government introduced a second-child policy last year to stimulate consumption.

More than 10 percent of JNBY’s sales this year have come from jnby by JNBY, which joined Alibaba’s B2C (business-to-customer) platform Tmall in 2013 before testing the water in offline stores for two years.

According to the prospectus, 37 percent of the funds raised will be used to finance capital expenditure, and 28 percent will be used to strengthen the omni-channel interactive platforms. Another 30 percent will be spent on providing funding for working capital and other general corporate purposes.

David Wei Zhe, executive chairman and founder of Vision Knight Capital, as well as former CEO of Alibaba, said the 1.0 version of the mainland’s apparel industry, which concentrated on store expansion and premium competition, has passed, and he believes that design and channel distribution will drive the industry’s future development.

The private equity fund focusing on investments in the internet and e-commerce has been advising the development of JNBY’s e-commerce and internationalization since three years ago. Currently, JNBY operates more than 1,316 stores, including 29 overseas.

Wei said an 8.5-percent dividend payout ratio of the company’s shares is attractive under the present low interest-rate environment.
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