Sino Techfibre, a Chinese maker of high-end microfibre synthetic leather, is seeking to raise up to S$120 million (HK$589.8 million) from an initial public offering in Singapore to enhance its production capabilities, market sources said. The Shandong-based company, which counts the People's Liberation Army as its customer, is selling 200 million new shares at between 50 and 60 Singaporean cents each to raise S$100 million to S$120 million, according to a term sheet sent to fund managers. The prices range translates to about 7.37 to 8.85 times the company's earnings last year and will value Sino Techfibre at as much as S$540 million. UOB Kay Hian Securities is handling the share sale. Sino Techfibre is expected to use part of the proceeds from the share sale for adding microfibre lines to double its capacity and expand into more higher-end products. The company will also expand its sales network by setting up offices in Beijing, Shanghai, Dongguan and Jinjiang, Fujian province. Sino Techfibre's net profit surged to 232 million yuan last year from 76 million yuan in 2004, driven by higher sales orders and new income contribution from micro synthetic leather production. Profit was 37 million yuan in the first quarter and 73.3 million yuan in the second quarter. Gross profit margin widened to 45.4 per cent by the end of the first quarter from 44.8 per cent last year. Sino Techfibre's fast earnings growth was partly fuelled by bulk contracts from the mainland's defence sector. The company has been the designated supplier of synthetic leather products to the PLA, the Chinese People's Armed Police Force and the Ministry of Public Security since 2003. China's synthetic leather industry is still growing rapidly, driven by limited supply of genuine leather as well as strong demand for a more eco-friendly substitute for polyvinyl chloride products.