Dongxiang stake put on the block

Morgan Stanley offered after the stock market closed to sell its stake in mainland sportswear supplier China Dongxiang (Group) for as much as HK$570 million, fund managers said.

The US bank will sell 203.8 million Dongxiang shares to institutional investors through wholly owned units MS Apparel and MS Apparel II at between HK$2.70 and HK$2.80 each, according to a sale document obtained by fund managers.

The price represents a discount of up to 8.2 per cent to Dongxiang's closing price of HK$2.94 yesterday.

Morgan Stanley, which is also the sole placing agent of the share sale, cashed in HK$1 billion from selling down its stake in the firm last year.

According to stock exchange filings, Morgan Stanley owned 266 million Dongxiang shares or 4.71 per cent of the company. A source said Morgan Stanley had reduced its stake over the past eight months and would own no more shares after yesterday's offer.

Dongxiang surged 24 per cent last month, touching a high of HK$3.23 on March 25, the day the company reported earnings. Profit rose 86 per cent to 1.37 billion yuan (HK$1.55 billion) last year, with a 94 per cent increase in sales to 3.32 billion yuan.

One fund manager said the company had strong potential given the robust demand from domestic consumers expected in coming years.

'However, the recent rally has made its valuation expensive compared with larger peers such as Li Ning and Anta Sports Products,' the fund manager said.