Yue Yuen Industrial Holdings, which makes shoes for brands such as Nike, Adidas and Puma, plans to raise about US$1 billion from the spin off of its mainland retail business in Hong Kong by February, market sources said. Yue Yuen filed for the listing of subsidiary Pou Sheng International (Holdings) on the Hong Kong stock exchange on December 12. Yue Yuen shareholders still have to approve the proposed deal. 'Their retail business is in very good shape but Yue Yuen is trading at an industrial stock level of 15-16 times [price-earnings] while Anta [Sports Products] is close to 40-50 times,' said Shadow Lau, an analyst at Kim Eng Securities. 'If they spin it off they can capture or unlock the value of the retail business.' Anta, a mainland shoe and sportswear label, raised US$405 million in July. Its shares have almost doubled in price since then and now trade at 48.8 times price-earnings. Investors have clamoured for such stocks because they expect companies in the mainland consumer sector to profit from rising incomes. Yue Yuen manufactures for more than 10 domestic and international sportswear brands. Last year, 58 per cent of all sales were generated from selling athletic shoes, followed by revenues from sales of casual shoes for brands such as Hush Puppies and Columbia, that accounted for 18 per cent of sales. About 38 per cent of sales were to the United States, while Asia accounted for 30 per cent of sales. The company operates YY Sports stores and also operates outlets or counters in mainland department stores. Yue Yuen in March said it would double its number of retail outlets to about 2,900 by the end of 2009. Founder and chairman Tsai Chi-jen started the company in 1988 and the Tsai family continue to hold a 12.84 per cent stake in the venture. Ms Lau last month raised her forecast for the company's revenues from wholesale and retail units next year by 8 per cent to US$769 million from US$709 million. That figure will make up 16 per cent of Yue Yuen's total revenues. November year on year retail sales on the mainland surged 18.8 per cent to a record 810.5 billion yuan while year to date retail sales rose 16.4 per cent to eight trillion yuan, according to government data released earlier this month. Average salary income has jumped as much as 15 per cent in the past two years. 'In general the retail business is booming on top of the economic growth and rising general incomes,' said Carrie Chan, a retail analyst at ICEA Securities. 'The major concern is the rental costs hike because a lot of local and international brands have entered the market so retail space is getting tight especially in the prime locations of first-tier cities like Beijing and Shanghai,' she said. Morgan Stanley and Merrill Lynch are arranging the sale. Unlocking value The shoemaker plans to spin off its mainland business in Hong Kong By the end of 2009, Yue Yuen plans to double the number of retail outlets to about: 2,900
