Sales taxes fail to dim watch firm's China hopes

PUBLISHED : Friday, 30 September, 2005, 12:00am
UPDATED : Friday, 30 September, 2005, 12:00am


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Premium watch distributor Sincere Watch (Hong Kong), hoping to raise up to $120.36 million from a share offering, plans to use half of the proceeds to expand its business in China.

Director Soh Gim Teik yesterday said although mainland sales taxes on luxury goods could be as high as 30 per cent, he was confident customers would pay for premium brand-name watches even though they could get a better deal in tax-free markets such as Hong Kong.

'There is always a market for brand products in China, but I believe that the current high sales tax on fine watches will gradually come down,' Mr Soh said.

Sincere Watch (Hong Kong) is being spun off from Singapore-listed Sincere Watch, which will hold 75 per cent of the company after listing.

An exclusive distributor of Swiss-made Franck Muller watches in Greater China and Thailand, Sincere Watch will issue 102 million new shares at an indicative price range of 90 cents to $1.18 each.

The initial public offering begins today and closes on October 5. Trading on the main board is scheduled for October 17.

Groupe Franck Muller has said it would subscribe to shares in the 90 per cent institutional tranche of the offer, but it did not specify how much.

Sincere Watch made a net profit of $52.15 million for the past business year to March, up 41.17 per cent from $36.94 million in the previous year. Turnover increased 30 per cent to $513.74 million from $395.34 million. Sales to China represented just 1 per cent of its total, with the bulk - 78.3 per cent - coming from Hong Kong.

The company has 25 points of sales in Hong Kong, Macau and the mainland.

Based on earnings per share of 17 cents last year, the offer is priced at a multiple of between 5.29 and 6.94 times. CIMB-GK Securities is the bookrunner and lead manager.