Pou Sheng International (Holdings), a mainland sportswear retailer raising up to HK$3.09 billion from an initial public offering in Hong Kong, may find 'limited interest' from local investors, market watchers say. 'It is not as big as the country's top sportswear retailers such as Li Ning and Anta and the company seems to have no special selling point to attract investors,' said Nelson Chan Kai-fung, general manager of Bright Smart Securities. Felix Man Kam-fai, director of Hantec Futures, said Pou Sheng did not have its own products and its growth basically relied on the existing distribution rights and licence agreements with brand companies and dealers. 'If it fails to renew those agreements, its profitability will be tremendously hurt,' Mr Man said. A research report shows that Pou Sheng's retail and brand licensing business together accounted for around 87.8 per cent of its total revenue for the year to last September. 'Our ability to maintain the existing distributorship and brand licence agreements is therefore critical to the growth of our business,' the company said in its latest prospectus. Pou Sheng is offering 823.378 million shares at an indicative range of HK$2.93 to HK$3.75 each. It launched a management roadshow in Hong Kong yesterday and is expected to open its retail subscription next Monday. Trading is expected to begin on June 6. 'Its current valuation is reasonable when compared with its rivals,' said a financial manager who declined to be identified. 'But a certain amount of its raised fund will be used to repay bank loans, which is surely not helpful to strengthen investors' confidence as well as interest in its offering.' Pou Sheng's shares are set at 17 to 22 times its forecast earnings for this year. By comparison, Belle International, a mainland footwear and apparel retailer, is trading at 28 times its 2008 earnings. Shares of Li Ning and Anta Sports Products, the country's two largest sportswear designers and retailers, are trading at 35 times and 27 times, respectively. Belle's shares dipped 0.68 per cent to HK$8.74 yesterday. Li Ning rose 1.4 per cent to HK$25.3, and Anta finished up 0.79 per cent at HK$8.96. According to its prospectus, Pou Sheng plans to use 56 per cent of the proceeds to repay bank borrowings, 32 per cent to expand the sales network for its retail and brand licensee businesses. Six per cent will be allocated to settle part of the call option premium it owed to joint-venture partners. The remainder will go to marketing and promotions as well as expansion of manufacturing capacity. Analysts said the upcoming Beijing Olympic Games would help boost sales. . 'I would not be surprised if the company's sales leap 20 per cent or higher this summer,' Mr Man said. For the financial year to last September, Pou Sheng's revenue jumped 49.05 per cent to US$555.9 million, while net profit surged 180.48 per cent to US$31.93 million. By the end of last year, Pou Sheng had a total of 1,324 retail outlets under its direct management on the mainland and 79 in Hong Kong and Taiwan. With most of its retail stores being single-branded 'YY Sports', Pou Sheng is distributing a wide range of leading international and domestic sportswear products on the mainland, including Nike, Adidas, Li Ning, Kappa, Reebok, Puma, Converse, Hush Puppies, Nautica, Wolverine and Asics. 'From a long-term perspective, Pou Sheng may benefit from its wider product portfolio than its rivals like China Dongxiang Group,' said Mr Man. Mainly distributing Kappa brand products on the mainland, China Dongxiang shares are trading at 21 times the company's forecast earnings for this year, which is very close to the high end of Pou Sheng's set valuation. Its shares rose 3.18 per cent yesterday to close at HK$3.90. Yiu Chin, director of financial analysis at Altruist Financial Group, said lukewarm market reception toward new offerings would have a negative impact on Pou Sheng's share sale. 'Many investors lost their passion for new stocks because of the volatile market early this year,' Mr Yiu said. Tepid market sentiment has forced about 11 companies to scrap their offerings in the first three months. Artini China, the latest to float shares on the main board, dived nearly 10 per cent at its trading debut last Friday. But Mr Yiu remained cautiously optimistic about Pou Sheng's share offering, saying that as a retail stock, it should benefit from the mainland's booming consumer market. What the analysts say Nelson Chan Kai-fung, general manager of Bright Smart Securities Pros: The upcoming Beijing Olympics will help boost the country's sales of sportswear and Pou Sheng will benefit from this trend. Cons: The company is not as big as market leaders such as Li Ning and Anta. It lacks special selling points. Felix Man Kam-fai, director of Hantec Futures Pros: Pou Sheng is selling an extensive range of top international and domestic sports brands, giving itself a wider market exposure than its rivals. Cons: Growth of the company largely depends on the existing distributorship and brand licence agreements with brand companies and licensors. If it fails to renew such agreements, its profitability will be hurt tremendously. Yiu Chin, director of financial analysis at Altruist Financial Group Pros: As a retail stock, Pou Sheng will be benefiting from the mainland's booming consumer market. Cons: The company does not have its own products. The market reception towards new offerings remains lukewarm. As such, Pou Sheng may just have limited appeal among investors.