Hong Kong's largest eye-wear company Moulin International finds itself trying to consolidate new acquisitions and develop a fairly fresh line of business in the middle of a global recession. Moulin is the most exposed of Hong Kong's eye-wear companies to the ebbs and flows of the global economy, with its commitment to retail and distribution as well as the more traditional manufacturing side. The challenges the company faces were hinted at by the last set of interim results showing a 36 per cent fall in net profits. Louis Wong Wai-kit, research head at Phillip Securities, said the original design manufacturing (ODM) eye-wear business was no place to be in a downturn. Although geared towards the middle rather than the high end of a market, sunglasses hardly top the list of consumer necessities. The drop in interim net profits was not only due to aggressive expansion in Europe but more a result of a fall in the company's ODM business, which was affected by the global economic downturn, Mr Wong said, adding that the expansion had not helped matters. 'Aggressively expanding in these economic conditions? The jury's out on whether they'll incur high risk and that may be a concern to investors because they may be doing the wrong thing at the wrong time.' Citing EuroMonitor figures, Kim Eng Securities estimates the size of the German, British, French and United States eye-wear markets combined is worth US$22.3 billion. Moulin recently purchased two European distributors Metzler and Filos, which have helped Moulin create an impressive distribution network across Europe's key markets as well as establishing a retail presence in Shanghai through the America's Eyes retail chain. There are questions as to whether the company has grown too quickly. Mark Po of Kim Eng Securities said next year would be one of consolidation for the company. Only after the two distributors were successfully sewn into Moulin's cloth did Mr Po expect net profits to increase by an estimated 3 per cent. In the meantime, given the company's exposure to the downstream end of the business, Mr Po only has a 'hold' on the stock, despite a forward price-earnings multiple of 6.9 times and a relatively generous dividend yield. Lombard Odier (Asia) managing director Benoit Descourtieux sold out of Moulin at the end of last year. He said his decision was made on the basis of the stock's performance and not on any problems with the business itself. Perhaps Mr Descourtieux should have held on to his Moulin stock given its performance this year. Having begun the year at 63 HK cents, it looks like the stock will end the year in much the same neighbourhood. No great shakes perhaps, but a stellar performance compared with the Hang Seng Index, which closed on Friday 26.08 per cent below where it began the year. Moulin remains on Mr Descourtieux's radar screen but the fund manager said liquidity was a concern. The issue of liquidity haunts Moulin. One analyst said more than 20 per cent of the company was held by a handful of funds, which were getting increasingly jittery as the stock price approached HK$1. 'There are three to four funds each holding 4 per cent to 5 per cent so any movement and people will get out. The funds are impatient about Moulin's price performance. They don't want to wait for the pick-up, they want to get out,' the analyst said. Mr Wong agreed this could pose a problem. 'It may be a concern if they opt for unloading the shares. 'That can be a double-edged sword. When they're upbeat there can be excessive appreciation in the price,' he said. However, Moulin is not the most liquid of stocks and Mr Wong recommends investors keep a close eye on daily volume - a sharp rise in turnover could indicate the beginning of a mass walkout by the funds.