Giordano extends rally on acquisition talk

PUBLISHED : Saturday, 29 March, 2008, 12:00am
UPDATED : Saturday, 29 March, 2008, 12:00am


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Shares of Giordano International continued to climb yesterday, edging up 1.29 per cent after strong gains on Thursday, even though the company denied a market rumour that it was engaged in acquisitions or sales transactions.

Peter Lau Kwok-kuen, the chairman of the garment company that sells casual wear mainly in Asia, said yesterday that it was 'not engaged in any negotiations with anyone over acquisition or realisation-related projects'.

However, he said Giordano was 'in talks with parties for future co-operation opportunities', although he declined to give details.

The company's shares closed yesterday at HK$3.14, with 5.2 million shares changing hands.

On Thursday, Giordano shares recorded their biggest intraday gain in more than 18 months.

The stock rose 12 per cent to HK$3.17 at midday on the strength of a market rumour that it was in 'unspecified talks' with potential investors for acquisitions.

The company had said on Wednesday in a filing with the Hong Kong stock exchange that its 'preliminary non-binding negotiations' were not related to any acquisitions or realisations'.

Nevertheless, the company's stock closed up 9.15 per cent at HK$3.10 in heavy trade of 17.66 million shares on Thursday amid investor hopes that a possible deal would boost the company's profitability. Prior to Thursday, Giordano's shares had fallen 24.06 per cent this year.

'The company's strong earning for last year may be another factor helping its share price,' said Fulbright Securities general manger Francis Lun Sheung-nim.

Giordano yesterday reported turnover of HK$4.95 billion for last year, up 13.2 per cent from 2006.

Net profit climbed 43.9 per cent to HK$295 million.

With earnings per share at 19.8 HK cents, an increase of 43.5 per cent, the company proposed a final dividend of 5 HK cents per share, raising the payout for the year to 21.5 HK cents.

'We hope to boost our turnover from the mainland to one-third of the total by the end of this year,' Mr Lau said.

With 820 stores on the mainland by the end of December, compared with 729 stores in 2006, the company saw mainland turnover rise to HK$1.35 billion from HK$1.09 billion a year earlier.

This represented 31 per cent of total revenue for the year. The remainder was generated mainly from outlets in Hong Kong, India, Singapore, South Korea, Taiwan and the Middle East.

In the first two months of this year, turnover from the mainland rose 43.2 per cent, compared with overall growth of 17.1 per cent in the same period.

Mr Lau said the company's capital expenditure would increase to between HK$250 million and HK$300 million this year, from HK$142 million last year, as it aimed to open up to 150 new outlets worldwide.

On the mainland, the company will open 120 outlets with new flagship stores in Guangzhou and Hangzhou.

Mr Lun remained cautious about Giordano's future performance. He said that opening more stores might 'not be good enough' for the company to outperform its rivals.

'More new and exciting selling points are needed to attract customers as they are becoming increasingly demanding,' he said.

Altruist Financial Group director of financial analysis Yiu Chin said Giordano was no longer the leading casual wear retailer on the mainland that it once was.

'Many more casual wear makers are now vying for a bigger share of the market and therefore the company will find it hard sustain strong growth as before,' Mr Yiu said.