The Hong Kong initial public offering of Sitoy, a handbag manufacturer for Prada and Coach, may draw a lacklustre response from the market, as investor enthusiasm for the luxury sector withers.
The company is seeking up to HK$986 million in a listing next month, to expand its manufacturing capacity and retail business. Sitoy is offering up to 249.6 million new shares at HK$2.95 to HK$3.95 per share, according to a term sheet for the deal.
Prada earlier agreed to buy 19.6 per cent of the shares. However, Coach, another big customer of Sitoy, was not a cornerstone investor.
Teras Yeung, chief executive of Sitoy, did not comment on Coach's position. But he said Sitoy's retail arm, Tuscan's, would not compete with Sitoy's existing clients in terms of shop location and market position.
'We won't open a Tuscan's shop in the same shopping mall as Prada or Coach,' Yeung said. He said he was not worried about losing the long-term relationship with Coach, which started commissioning Sitoy to manufacture its handbags in 1998.
Founded in the 1970s, Sitoy is one of the largest outsourcing manufacturers for luxury handbags and small leather goods in the world, with a capacity for 16 million items per year. The company reported revenue of HK$2.5 billion for the year to June and net profit of HK$302 million, according to a filing with the Hong Kong Stock Exchange on Monday.