SNAPPY garment manufacturer Crocodile is a stock with plenty of upside. With shares closing at $1.14 on Friday, they offer a dividend yield of 6.8 per cent and are trading at a cheap 8.7 times 1993 earnings.

However, investors should beware - the croc might bite back. The company's recent results were disappointing and shares price performance has been uneven. The company will experience slower earnings growth than competitors such as Giordano and Gold Lion.But given Crocodile's cheap share price, its shares are relatively more attractive.

Following the management's rationalisation of operations, the company is well-positioned to benefit from strong sales to the US and robust sales in China.

Last year, profits before extraordinary items slid by almost 50 per cent to $55.5 million.

For fiscal year 1993 brokerage Morgan Grenfell is predicting a 30 per cent rebound to $72.6 million. Profits are expected to increase by more than 20 per cent to almost $88 million in 1993.

The company's main money spinner, garment sales in Hongkong, is expected to increase thanks to a broadening of the product line.


The company has increased its label products.

Last June it began distributing Stefanel products, which compete with Benetton and other quality labels, through three outlets.

In two years, the company plans to increase the number of outlets to eight to capture more of the upper end of the retail market.

The company operates 54 outlets throughout the territory. Of these 40 are Crocodile shops, 10 sell Lacoste products and four carry the Stefanel brand.


Last year, China sales accounted for only $27 million out of total sales of $737 million. By 1994, China sales could reach $80 million out of sales of $969 million. The company has 10 franchise outlets in China and plans to add 13 more over the next six months.

Sales to the US are expected to continue to increase on the back of recovery in the US economy. Last year, sales to the US accounted for 28 per cent of turnover and 11 per cent of operating profits.


Last November the company placed out 103 million new shares to acquire land for a factory in Zhongshan and further expansion in China. At present, the company has a net cash position of more than $20 million. Unless the company is greedy, it should not have to issue more paper soon.

Earnings per share growth is expected to increase by 15 per cent in 1993, followed by 12 per cent growth in 1994.