bodyType

customContents

entityId

entityUuid

articlePageQuery

filter

article

articleBaseAdvertisingInfoArticle

articleListArticle

articleSeoArticle

hooksArticleAcknowledgementGateOverlayArticle

hooksTrackPageViewArticle

hooksContentInterestArticle

articleLinkingDataContent

hooksAmpRedirectArticle

articleSchemaContent

liveArticle

advertZone

sentiment

contentLock

topics

types

sections

paywallTypes

createdDate

publishedDate

urlAlias

moreOnThisArticles

sponsorType

commentCount

authorLocations

authors

corrections

displaySlideShow

multimediaEmbed

printHeadline

seriesContainer

articleSpeeches

socialHeadline

headline

images

flag

firstTopic

glossary

flattenTypeIds

image

relatedLinks

relatedNewsletters

__typename

sponsor

pdfFiles

seriesReverseOrder

series

disableOffPlatformContent

published

updatedDate

summary

subHeadline

body

keywords

readingTime

customTimezone

liveContents

Suzanne Harrison

It was no secret that shares in Giordano International emerged from last year in better shape than those of most Asian retailers. But what does the casual clothes group have up its sleeve this year?  According to analysts, there was more good news on the horizon, based primarily on revenue growth.

 'We are raising our target price for Giordano from $9 to $11,' Salomon Smith Barney retail analyst Kent Chan said.

 The stock closed last Friday up 2.9 per cent at $8.85.

 'Our more positive outlook is based on stronger earnings momentum from new expansion plans and the successful launch of the Blue Star Exchange brand,' Mr Chan said.

 ABN Amro retail analyst Jeremy Sutch said: 'There is a reason to believe that a good set of results will be reported [in March].

 'Things are still humming along in all markets,' he said. 'It seems sales for all markets in January have been marvellous.'  Furthermore, Mr Chan said a special dividend was possible.

 'Management normally targets a 33 per cent payout ratio,' Mr Chan said. 'Since it has been unable to identify a use for the over US$100 million in net cash, it is possible a special dividend of another 33 per cent may be paid to investors to reward minority shareholders for the full recovery in the business [last year].'  This could imply a 15 cent, full-year pay-out and another 15 cent special dividend, totalling a 3.3 per cent yield.

 Mr Chan said although Salomon would prefer it to maintain cash for acquisitions and expansions, the dividend potential was icing on the cake after such a strong share price and operating performance last year.

 The group's share price made impressive gains last year, particularly as speculation was rife that the company was poised to make a takeover bid.

 Giordano shares appreciated a massive 451.72 per cent last year, compared with the Hang Seng Index's 68.8 per cent appreciation.

 In the second half, the company announced it would make a bid for the cash-strapped Theme International Holdings, also listed in Hong Kong.

 In late November, Giordano withdrew its takeover bid after a fallout with Theme and its bank creditors.

 Clashes between the three parties surfaced over Giordano's desire to conduct due diligence on Theme's books and accounts.

 Theme and its creditors were pushing Giordano not to conduct due diligence and claimed it would slow down the company's restructuring.

 Giordano director Terry Ng Sze-yuen said Theme and its creditors failed to meet a deadline on whether it would accept its deal.

 'We can't wait indefinitely,' Mr Ng said at the time.

 Giordano revised its offer, including a higher level of debt repayment, but received little support from Theme at board level.

 Analysts are currently focusing on the group's new Blue Star Brand and the earnings results due in March.

 Both Mr Sutch and Mr Chan have buy recommendations on Giordano.

 Mr Chan's has a medium risk attached.

 Salomon raised its earnings per share forecast for next year by 8 per cent to 71 cents, from 66 cents.

 'We believe that better than expected results, to be announced in March, will drive the market to raise earnings projections for 2000 and 2001 to our levels,' Mr Chan said in a report.

 Mr Sutch revised his six-month share price target to $10.10.

 He said: '[Last year] was a combination of the top end picking up which only accelerated in the second quarter.

 'It was also obviously a huge eradication of fixed cost base . . . going into 2000, the difference is that most of the growth will be driven by revenue.'  Mr Chan said in his report that Blue Star Exchange is similar to the United States-based Gap's low-price extension line called Old Navy.

 He said the products were more basic and geared towards the lower income and value segment.

 'Now, as Giordano's offering migrates toward fashionable, trendy items and better margins, Blue Star can pick up the business that was left behind,' Mr Chan said.

 Giordano managed to emerge from the Asian economic crisis as a star performer on the back of cost controls.



Traders bullish on outlook for Giordano