Capital Gains Tax

Prada sure of keen response to stock offer

PUBLISHED : Monday, 13 June, 2011, 12:00am
UPDATED : Monday, 13 June, 2011, 12:00am


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Italian fashion house Prada expects enthusiastic responses to its retail offering in Hong Kong today, despite claims the listing price is expensive and local investors will be liable to capital gains tax and withholding tax.

According to its listing prospectus, Hong Kong residential shareholders will be liable to 12.5 per cent tax on gains earned on selling its shares and will be subject to a withholding tax of 27 per cent on dividends. This is under the Italian law as Prada is an Italian firm and there is no double-tax treaty between the country and Hong Kong.

'We expect the Hong Kong retail offering will be very enthusiastic,' Mary Koo Tin-yee, Goldman Sachs' executive director of consumer retail in Asia, said yesterday, when asked if the taxes would affect interest.

'The Prada team thinks the current price is a very reasonable price range that reflects the value of the company,' she said. 'As for speculation that it is expensive, we do not comment but we do not share that view.'

Prada is set to be the first Italian firm and the first luxury Western brand to list in Hong Kong, where it is due to debut on June 24. Retail investors in Hong Kong can start applying from today until noon on Thursday.

Based on its indicative offer price, ranging between HK$36.50 and HK$48 per share, and its forecast of Euro150.7 million (HK$1.7 billion) net profit in the six months to July 31 this year, the offer means a price of 27 times its P/E ratio. The prospective P/E marks a more than 20 per cent premium on its rival, Burberry, and is 18 times the P/E of LVMH, the world's biggest luxury goods firm. It will offer 423.3 million shares.

Despite the turmoil in global stock markets, Koo said Prada was very optimistic about the offering.

Reuters quoted a source familiar with the matter as saying the fashion house, which is seeking to raise up to HK$20.31 billion, had generated five times demand for its offer. But the source declined to say which institutions had committed funds to the IPO or at what price point the book was covered.

Prada said it intended to open 70 directly operated stores in Asia by 2014, with 30 on the mainland. It said 75 per cent of the funds raised would be used to expand its directly operating store network and upgrade its existing stores in the next 12 to 18 months. The rest would be to repay bank loans and for working capital.

'It is exciting to do an IPO here,' Miuccia Prada said. 'I was [one of] the first saying the idea of a listing on the stock market.'