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Tack Fat Group International GK Goh analyst Steven Chan initiated coverage on the apparel manufacturer and retailer with a 'buy' recommendation, satisfied with the company's financial results.

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Mr Chan said he expected the company's order flows and its Blue Cat retail network, together with improved operating efficiencies, would see earnings per share expand at least 15 per cent a year until at least 2005.

Also, there could be further upside from new customers, especially from the European Union and Canada because there are no quotas on textiles between the two markets and the firm's manufacturing base in Cambodia.

A rapid expansion of the Blue Cat line in China and widening gross margins could also prove beneficial to the upside.

Mr Chan put a fair value of 67 HK cents on the stock, based on the 12-month average of eight times forward earnings for its peer group.

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With management expecting to maintain its 30 per cent dividend payout - translating to a 5 per cent yield - Mr Chan said that his valuation implied 25 per cent upside from the shares' present level.

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