Leather bag makers Mascotte Holdings and Wah Fu International Holdings are to raise about $140 million in public share offerings beginning today. Mascotte, which makes 85 per cent of its photographic bags under clients' brands, is raising a gross $81 million through the sale of 81 million new shares at $1 a share, with a one-for-five warrant issue attached. Wah Fu is to raise $56.25 million through the sale of 29.44 per cent of its enlarged capital at $1 a share. Of the $70 million net proceeds of Mascotte's issue, $10 million will be spent reducing $23.7 million in outstanding debt and lowering its net debt-to-equity ratio to 10 per cent from 27 per cent. A further $26 million will be spent constructing a new production complex and buying new machinery in Huizhou, Guangdong. Another $10 million will be spent developing new products and penetrating the Japanese market, while the remainder will be to boost working capital. Wah Fu chairman James Chaung said about $20 million of the proceeds of his company's issue would be used to expand production capacity, which is expected to boost output by 20 per cent. Its gearing ratio will fall from 56 per cent to 45 per cent after the float. The company expects to report a $30 million attributable profit to shareholders this year, 15 per cent higher than the $25.99 million achieved in March 1997. Its shares are being offered on a prospective price-earnings multiple of 7.3 times, while Mascotte's are being issued on a multiple of 7.04 times. Local brokerage house Asia Securities Global has acquired 7.78 per cent of Wah Fu's enlarged capital. Mr Chaung said the strategic investor would enable Wah Fu to access raw leather at a fair price from Asia Securities' Taiwan parent. Mascotte, too, has placed shares with strategic investors, placing 12 per cent of its issued capital to four parties for $29.16 million. The investors have promised not to sell the shares within a year of the stock's listings on September 25. Wah Fu will list on September 24. Mascotte has estimated that its net profit will rise to $46 million in the year to March 1998, compared with last year's $45.17 million. Finance director Alvan Kwok Kwan-hung said the estimate was based on limited figures in the two months to May. He said the company would see a contribution from Benetton photographic bags after it won a three-year licence last October to produce them. Chairman Chan Oi-ling said the company had been unscathed by the worldwide downturn in sales of photographic equipment last year. It has US$2.3 million in orders for Benetton bags up to June. It shipped 48 per cent of its products to Europe last year, 26 per cent to Canada and the United States, and the rest to Asia. Wah Fu said it planned to beef up production of higher margin leather portfolios and soft luggage products to sustain double-digit profit growth. Financial controller Steven Chan Cheuk-ho said both leather portfolios and soft luggage products offered a net profit margin of 18 per cent, much higher than the 8 per cent achieved by women's handbags, which accounted for 46 per cent of HK$235.23 million in sales last year.