'The mainland's rich female consumers prefer internationally well-recognised skincare and cosmetics products and it's really hard for a comparatively new brand to win their hearts,' Mr Man said.

'Their strong sales may reflect consumers' impulse to try new goods but if the products fail to appeal to them with good quality, growth would not be sustainable.'

Bio Beauty has set the indicative range of the 390 million shares in its initial public offering at HK$4.88 to HK$6.18 each to raise up to HK$2.41 billion, according to a sales document sent to investors.

The price range represents 44 to 56 times the company's earnings last year and 15.8 to 20 times its forecast earnings next year, according to market sources.

By comparison, Sa Sa shares are trading at about 17 times forecast earnings.

Bio Beauty, which has brought in Chow Tai Fook Nominee and World Fund as cornerstone investors, started its international roadshow on Thursday and will open its retail subscriptions next Friday. The trading debut is scheduled for December 12.

Macquarie Securities and ICEA are arranging the deal.

The company, which entered the mainland market five years ago, runs more than 1,200 points of sale including outlets in third- and fourth-tier cities such as Shanming, Dongying and Karamay. It also has about 20 outlets in Hong Kong and Macau.

According to the sales document, revenue in the mainland reached HK$241.7 million in the first half this year, accounting for 94.1 per cent of total turnover.

The company said it would use 20.1 per cent of the issue proceeds to fund retail network expansion, as it aimed to more than double the number of sales points within the next four years.

The expansion will include at least 475 flagship stores and counters for Marjorie Bertagne products and 1,400 new points of sale in hypermarkets for a new product line MB2 targeting younger customers.

With price tags ranging from 150 yuan to 380 yuan per item, the MB products are targeted at career women and rich housewives.

MB2 cosmetics products, which will be launched in the second half of next year, will retail for less than 100 yuan.

Some 15 per cent of the net proceeds would be spent on the development, production and promotion of the MB2 brand, the document said. About 34.5 per cent will be used for marketing and brand building.

Bio Beauty plans to launch men's skincare products and perfumes in the later part of next year but it would not consider acquisitions in the near future, according to chairman Judy Lau.

Kenny Tang Sing-hing, an associate director at Tung Tai Securities, said: 'The outlook of Bio Beauty will be good as it has the technology and ability of research and development which means added value apart from its extensive sales network. This stock with the concept of domestic consumption will benefit from the mainland's booming retail market.'

Rising disposable incomes, increasing numbers of working women and the growing popularity of grooming are driving the mainland's cosmetics and toiletry industry.

Last year, the mainland's cosmetics and toiletry industry reached 95 billion yuan in retail sales, according to Euromonitor International, a global market research agency.

However, one analyst said the investor frenzy for initial public offerings could be cooled by the recent volatile market despite Bio Beauty's strong profitability.

For the six months to June, Bio Beauty's net profit jumped 76.17 per cent to HK$87.8 million as sales rose by 35.9 per cent to HK$256.9 million from HK$189.07 million. Gross profit margin was 78.1 per cent and net profit margin reached 34.17 per cent.

Last year it posted a net profit of HK$141.9 million, accounting for 65.36 per cent of Global Green's net profit and up 40.4 per cent from HK$101.5 million in 2005.

Global Green's stake will drop to 55.69 per cent after the offering from 76.91 per cent, while that of strategic investor Macquarie Investment will be diluted to 6.86 per cent from 9.15 per cent.

What the analysts say

Felix Man Kam-fai, trader, Hantec Futures

Pros: The company has an extensive sales network on the mainland

Cons: Its Marjorie Bertagne brand may not be able to compete with more famous international brands to win high-end mainland customers

Annie Wong, analyst, Philip Securities

Pros: Bio Beauty has a high profit margin

Cons: The company's net current liability reached HK$675.7 million by the end of June

Ricky Tam Siu-hing, director, Champlus Asset Management

Pros: The firm boasts a domestic consumption concept to capture the mainland's booming retail market

Cons: Its price-earnings ratio is relatively high