Chinese lingerie supplier Best Pacific seeks expansion funds

Best Pacific aims to raise up to HK$625 million from the offering of 250 million shares to boost production facilities and pay off debt

PUBLISHED : Tuesday, 13 May, 2014, 1:13am
UPDATED : Tuesday, 13 May, 2014, 4:07am

Best Pacific International, a mainland-based supplier of fabrics for Victoria's Secret lingerie, has kicked off its initial public offering to raise up to HK$625 million.

Subscription for shares in the Dongguan-based maker of lingerie and sports underwear material opens today.

On offer are 250 million new shares, which are priced between HK$1.85 and HK$2.50, translating into a price-earnings ratio of 6.8 to 9.2 based on forecast earnings for this year.

Best Pacific's share sale could prompt rivals such as Shenzhen-based Regina Miracle and Cosmo Lady, which has Taiwanese model Lin Chi-ling as an endorser, to follow suit.

"The listing will test a volatile market and allow the company to broaden its source of funding in the long term," company chairman Lu Yuguang said yesterday.

Bankers said the float had received positive feedback mainly from long-only funds since it offered a market-friendly pricing and higher clarity over its earnings projection.

Both listing hopefuls and underwriters have turned more cautious of late after the high-profile pullback of pork producer WH Group's offering.

On future inventory conditions, Best Pacific's chief financial officer Jack Chan Yiu-sing said its average inventory turnover should stay at about 90 days.

The figure has been rising steadily for the past three years to 88 days last year.

Average trade and bills payables turnover days have also reached 88.7, indicating the firm's financial resources might hold up in the face of slowing sales.

"The current inventory level and payables to our suppliers may persist for some time," Chan said.

About 70 per cent of the money raised from the share offering will be used for expanding production facilities, while a further 20 per cent will go towards repaying borrowings.

Chief executive Zhang Haitao said the company planned to complete the construction of its eighth production facility and ninth factory next year but declined to comment on how the additional units would translate into future earnings.

Cash and cash equivalents dropped to HK$97.5 million last year from HK$147.7 million in 2012, while gearing ratio fell significantly to 95.8 per cent from 141.7 per cent, according to the company's listing document.

The firm plans to expand into the lace business, which has a higher average selling price than elastic fabrics and webbing.

The company paid HK$60 million in dividend before the listing.

It will price its shares on Friday and announce the allotments on May 22. Shares will start trading on May 23.

CCB International is the sponsor of the offering.