SOURCE: Speed Apparel Holding Limited

Speed Apparel Holding Limited

May 15, 2017 06:26 ET

Speed Apparel Holding Limited to raise a maximum of approximately HK$80 million by way of Share Offer

HONG KONG, CHINA--(Marketwired - May 15, 2017) - Speed Apparel Holding Limited ("Speed Apparel", together with its subsidiaries, the "Group") (HKSE: 8183)

Highlights

  • An apparel supply chain management services provider, headquartered in Hong Kong, provides one-stop apparel supply chain management solutions for its customers.
  • Services ranging from fashion trend analysis, product design and development, sourcing and procurement of materials, production management, quality control and logistics services.
  • Principally sells knitwear products predominately in the Japan market. Products were also sold to Hong Kong, the PRC, Taiwan, France, the USA, Australia and South Africa.
  • For the year ended 31 March 2016, revenue increased by approximately 9.3% y-on-y to HK$435.2 million.
  • For the year ended 31 March 2016, profit increased by approximately 19.1% y-on-y to approximately HK$12.5 million.
  • Revenue derived from the sales of menswear increased by approximately 91.2% y-on-y to approximately HK$71.9 million for the year ended 31 March 2016.
Financial Highlights
         
    Year ended 31 March   For the eight months ended 30 November
HK$'000   2015   2016   2015   2016
Revenue   397,968   435,206   262,949   311,625
  Womenswear   360,390   363,294   206,459   242,803
  Menswear   37,578   71,912   56,490   68,822
Gross profit   62,608   64,147   35,737   45,376
Profit before taxation   12,620   15,833   7,835   7,239
Total comprehensive income for the year/period   10,532   12,467   6,597   4,758
                 

Speed Apparel Holding Limited ("Speed Apparel", together with its subsidiaries, the "Group") (HKSE: 8183), a Hong Kong apparel supply chain management services provider, announces the details of its plan to list on the Growth Enterprises Market of The Stock Exchange for Hong Kong Limited("SEHK") today.

A total of 125,000,000 shares will be offered under the Share Offer, of which 112,500,000 Shares, or 90%, subject to re-allocation, will be offered by way of Placing while the remaining 10%, or 12,500,000 Shares, subject to re-allocation, will be offered under the Public Offer. The offer price per offer share is expected to be not less than HK$0.40 and not more than HK$0.64. The Public Offer will commence on 16 May 2017 (Tuesday) and close at 12:00 noon on 19 May 2017 (Friday). The allotment result is expected to be announced on 29 May 2017 (Monday). Dealings in Speed Apparel's shares on the Growth Enterprises Market of the SEHK are expected to commence at 9:00 a.m. on 31 May 2017 (Wednesday).

Assuming an Offer Price of HK$0.52 per Share (being the mid-point of the indicative Offer Price range), the aggregated net proceeds from the Share Offer, after deducting related expenses, will be approximately HK$39.4 million. Speed Apparel intends to apply the net proceeds as follows: 1) approximately 13.5% for strengthening and diversifying the Group's customers base; 2) approximately 26.8% for further expanding the Group's product mix to cater to the customers' need; 3) approximately 20.2% for enhancing the Group's design and development capabilities; and 4) approximately 39.5% for enhancing the Group's inventory management to strengthen operational efficiency.

Messis Capital Limited is the Sponsor of Speed Apparel for the listing and Great Roc Capital Securities Limited is the Bookrunner. Joint Lead Managers are Founder Securities (Hong Kong) Limited, RHB Securities Hong Kong Limited and Quam Securities Company Limited.

Apparel Retail Market In Japan
Japan is Hong Kong's second largest re-export destination for knitted or crocheted apparel items, accounting for 9.2% of the total re-export value, second only to the US. In 2015, the re-export value of knitted or crocheted apparel items from Hong Kong to Japan reached USD840.2 million.

The sustained economic downturn in Japan has caused a drop in disposable income. The consumption pattern in Japan apparel retail market has gradually shifted to local apparel brands and other fast fashion brands with affordable price. The apparel retail market in Japan is expected to recover due to growing popularity of internet apparel retailing, increasing inbound tourism and changing consumer pattern, with total expenditure generated by tourists increased 71.5% yoy to more than JPY3.5 trillion in 2015.

The retail sales value of apparel is projected to reach approximately USD72,722.3 million in 2020, representing a CAGR of approximately 3.4% from 2016 to 2020.

Business Overview
The Group is an apparel supply chain management services provider. Majority of the Group's products were sold in the Japan market. Revenue from this market amounted to approximately HK$367.3 million, HK$390.8 million and HK$288.9 million for the two years ended 31 March 2016 and the eight months ended 30 November 2016, which accounted for approximately 92.3%, 89.8% and 92.7% of the Group's total revenue, respectively. The Group provides one-stop apparel supply chain management solutions for its customers ranging from fashion trend analysis, product design and development, sourcing and procurement of materials, production management, quality control and logistics services.

The Group's revenue was mainly derived from the sales of womenswear, representing approximately 90.6%, 83.5% and 77.9% of the Group's total revenue respectively. The revenue derived from the sales of menswear significant increased yoy by approximately 91.2% to approximately HK$71.9 million for the year ended 31 March 2016. Such increase was mainly attributable to the increase in sales orders of menswear placed by existing customers and more frequent marketing activities implemented by the Group during the year.

During the same period, the percentage of revenue contributed by the largest customer, Marubeni amounted to approximately 43.9%, 50.8% and 50.9% respectively. Marubeni is a designated sourcing agent of a Japanese leisure and casual brand which ranked third in terms of retail value in Japan apparel retail industry in 2015 as stated in the Euromonitor Report. 2 new stores of this brand have been opened in Tsim Sha Tsui and Causeway Bay in late March and early April 2017, respectively.

Competitive Strengths

1) Established business relationships with the Group's customers
At the Latest Practicable Date, the Group had maintained business relationships with its five largest customers for a period ranging from about 5 to 15 years. The Directors believe that the Group's commitment to provide high quality and reliable services helps strengthening the relationships between the Group and its customers, which would increase the sales of the Group.

2) One-stop solution services provider
Over years of collaboration with the customers in Japan, the Directors believe that the Group has accumulated extensive understanding of the brand requirements of its customers, market awareness, industry and technical apparel know-how. Being a one-stop solution provider enables its customers to operate in a more cost-effective and efficient manner.

3) Strong and established product design and development capabilities
The Group has a design and promotion department which is mainly responsible for devising and providing new designs for the coming collection of knitwear products in accordance with the market fashion trend and the preferences of customers. The Group generally provides over 100 new knitwear designs in each main fashion season. The design and promotion department conducts market research and attends apparel trade shows to keep abreast of the latest fashion trends and product development, which enables the Group to quickly respond to style changes and advances in the apparel industry.

4) Management team with extensive apparel industry knowledge and experience
The Group's management team has extensive apparel industry knowledge and experience. The Directors believe that the management team's extensive experience and in-depth knowledge of the apparel industry would enable the Group to understand the market trends and the needs of its customers in a timely and efficient manner.

Business Strategies

1) Strengthening and diversifying customers base
The Group plans to co-organise private exhibitions with its customers as regular events for each of the main fashion season. This enables the Group to increase its market exposure and reputation in Japan apparel industry, diversify its customer base and revenue source which will in turn drive the growth of the Group's business.

2) Further expanding product variety to cater for the customers' needs
The Group intends to expand its market in the men's knitwear sector and broaden its existing product types to cut-and-sewn knitwear and seamless knitwear. The gross profit margin of seamless knitwear was approximately 30.9%, which is generally higher as compared to the Group's existing products. It is expected that the gradual and continuing evolution of the Group's product mix will enable the Group to improve its revenue streams and product diversification which could reduce the seasonality impact over the Group's business performance.

3) Enhancing design and development capabilities
The Directors consider that there is a potential growth in the low-priced, fast fashion apparel in Japan market. The Group plans to incorporate a new operating entity in Japan and set up a showroom with a design team and an account servicing team by recruiting local experienced designers and account servicing staff. The incorporation of a new office in Japan aims to enhance the standard and quality of the Group's products, to display and promote more sample products to customers and to perform liaison function for the Group.

In addition, the Group also plans to strengthen its product design efficiency by upgrading various computer software for design and development and will continue to arrange its staff to attend trade fairs and fashion shows regularly so as to keep them abreast of the latest fashion trends and industry know-how.

4) Enhancing inventory management to strengthen operational efficiency
The Directors consider to utilise part of the net proceeds to purchase and maintain an optimal level of raw materials for increasing orders or Short-notice Orders. In addition, the Group plans to procure an inventory management system in order to strengthen its operational efficiency by tracking the incoming and outgoing inventory levels of the raw materials. So that the Group would be able to respond swiftly to customers' immediate need and compete against other apparel chain services providers.

About Speed Apparel Holding Limited
Speed Apparel is an apparel supply chain management services provider. Headquartered in Hong Kong, the Group principally sells knitwear products. The Group provides one-stop apparel supply chain management solutions for its customers ranging from fashion trend analysis, product design and development, sourcing and procurement of materials, production management, quality control and logistics services. During the Track Record Period, majority of the Group's products were sold to Japan. The Group's products were also sold to Hong Kong, the PRC, Taiwan, France, the USA, Australia and South Africa. For the two years ended 31 March 2016, revenue of the Group amounted to HK$398 million and HK$435.2 million, representing an increase of 9.3%; and profit for the year amounted to HK$10.5 million and HK$12.5 million, representing an increase of 19.0%.

Contact Information

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    Stimulus Investor Relations Ltd.
    Contact: Ms. Hill Ho / Mr. Michael Yeung
    Tel: +852 3159 2944 / +852 3159 2994
    Email: Email Contact / Email Contact