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

SCMP Reporter

Analysts differ over the motives behind Michael Ying's hefty disposal of shares

Investors can often benefit from paying close attention to the trading activities of the majority shareholder. Recent sales in Esprit Holdings stock have been sufficient to keep shareholders on their guard.

Last Wednesday,  chairman and controlling shareholder of the fashion retailer Michael Ying Lee-yuen  sold 40.5 million shares at between HK$14.70 and $14.95 each, decreasing his holding from 42 to 38 per cent.

While Esprit has cited 'improving free float and trading liquidity' as the main reason for the placement, investors are looking at the disposal differently.

Since the  placement the counter has slid 5.53 per cent to close at $14.50, while the Hang Seng Index has risen 2.85 per cent  in the same period.

Mr Ying's sale was not the first time the controlling shareholders or the management of Esprit have cut  their stakes.

Mr Ying and other executives have been offloading their Esprit shares over the past two years. The last transaction made by Mr Ying took place in February when 2.23 million shares were sold at an average price of $15.56. But analysts said the placement last week was different from the previous disposals.

'Previous sales were often made after exercising the management's stock options and there was no change in the ownership percentage,' said Kenny Tang Sing-hing, associate director at Tung Tai Securities. 'But Ying's sale last week was not related to any options exercise.'

This difference has triggered investor concerns about the group's prospects. They are especially concerned about the outlook in Germany, which has been the group's engine for growth, as the country's economy continues to weaken.

Esprit's sales in the German market accounted for 70.41 per cent of total operating profit last year, while another 21.05 per cent of operating profit came from its operations in Belgium and the Netherlands.

Investors are also concerned about the US wholesale and consignment businesses which Esprit expanded into last year.

Esprit has been upbeat about its US operations and forecast that it would contribute up to US$60 million for the year to June 2004, and US$120 million by 2005.

'Despite the company's optimism, I see the US business as a major risk to the company and would like to see some supporting evidence,' said Alex Wong, asset management director at Rexcapital Asset Management. He said he would remain cautious and  take a wait-and-see approach until the announcement of the full-year results to June.

While some investors and analysts take the disposal as a bad signal, some believe the share placement does not reflect any fundamental change in the company.

A Thomson First Call survey of 26 brokers has found a consensus 'buy' recommendation on Esprit.

'We recognise that it is common for major shareholders to periodically reduce their holdings in companies they own,' said Ada Poon, an analyst at UBS Warburg. '[There is] no change to our earnings estimates or recommendations.'

Fundamentally, analysts and investors said the company looked strong and would continue to deliver growth.

'Amid a weak German economy, the company is able to gain market share at the expense of other competitors,' said Peter Chau Ming-tak, deputy managing director at Tal CEF Global Asset Management.

The appreciation of the euro will help lift Esprit's earnings. The majority of its revenue receipts are denominated in euros, while about half of its sourcing is from Southeast Asia. Daiwa Institute of Research's analyst Natalie Chow estimated that every 5 per cent appreciation in the euro boosted Esprit's bottom line by 3.1 per cent.



Esprit chief's sell-off gives investors jitters