Milan Station hopes to bag HK$270m IPO
Cash-rich mainlanders' appetite for luxury products is driving the revenue of designer handbag outlet Milan Station, which is now seeking up to HK$270 million in an initial public offering.
The Hong Kong-based firm, which operates under the name Milan Station and France Station, has seen more mainland consumers snapping up its new and second-hand handbags from brands such as Hermes, Chanel, Louis Vuitton and Gucci in its 14 outlets in Hong Kong, Macau and Beijing.
The size of Hong Kong's designer handbag market reached HK$9.6 billion in 2009, with 45 per cent of sales made to mainland customers, according to a pre-listing prospectus filed with the Hong Kong stock exchange by Milan Station yesterday.
The company's revenue last year totalled HK$730.3 million, up 19.5 per cent from 2009. Net profit grew 38.5 per cent to HK$54.3 million from 2009.
But the company said the cost of operating outlets in Hong Kong's prime shopping destinations such as Causeway Bay and Central, where most of its stores are located, had risen substantially.
Rent surged almost 40 per cent from 2008 to HK$43 million last year, with the company paying on average HK$525,400 per square foot for its Hong Kong stores.
The company plans to set up 24 new outlets in Beijing, Shanghai, Guangzhou, Chengdu, Hangzhou and other mainland cities in the next two years.
Milan Station started pre-marketing its offering yesterday, aiming for a flotation by the end of this month. The planned offering comes at a time when market sentiment is slightly shaky.
The Hang Seng Index has dropped 1.7 per cent over the past week. Yesterday, it closed at 23,633.25 points, down 0.37 per cent, or 87.56 points.
Yuanda China Holdings said on Friday that it was cutting the size of its planned HK$4.2 billion IPO, without citing reasons. The company makes curtain walls - thin, usually aluminium-framed internal walls.
Analysts believe the mainland company's valuation was not attractive for investors, who remain cautious about the equity market.
The overall demand for IPOs has been weak and larger offerings have had to pull in orders from institutional investors to make their listings happen, said Mark To, head of research at Wing Fung Financial Group.
'Milan Station is well recognised,' To said. 'It sells Louis Vuitton bags, but it's not Louis Vuitton.'
Hong Kong's designer handbag market netted HK$9.6 billion in 2009
The percentage of sales made to mainland customers is: 45%