2 Years After The Privatization Of The Delisting, The Former "Shoe King" BELLE Returned To Hong Kong Stock.

In October 10th, BELLE's stock market was listed on the Hong Kong stock market. As of October 14th, it closed at HK $9.58 / share, with a total market value of HK $59 billion 400 million, which has exceeded 53 billion 100 million Hong Kong dollars in 2017 when it was privatized.

After two years of capital operation, BELLE and its investment in Hong Kong successfully brought back to Hong Kong stocks. "As an investment institution, high allocating capital may choose to quit in the future," Shen Meng, executive director of incense capital, told China News Weekly.

　　 80% the main store is Nike and ADI.

Tao Bo international is BELLE's sports business line, the main sports shoes and clothing retail, currently with Nike, Adidas, Reebok and Puma 11 top international sports shoes and clothing brand cooperation, in essence, is the "middleman make the difference" business. Among them, the main brands, Nike and Adidas, contributed most to their revenue. In the past three years, Nike and Adidas accounted for about 90% of the total revenue of the company.

The cooperation between Tao Bo international and Nike and Adidas has a long history. In 1999, Tao Bo international established a cooperative relationship with Nike and became the largest retail partner of Nike in China in 2004. Also in 2004, Tao Bo international established a cooperative relationship with Adidas and became the largest retail partner in Adidas in 2012.

According to the prospectus, Tao Bo international has 8343 Direct stores and 1880 franchises. Of the direct stores, 98.8% are single brand stores, of which 6663 are the main brands, Nike and Adidas stores, accounting for 80% of the direct stores. Therefore, the sales volume of the international single store is also in the forefront of the industry. The prospectus shows that the average retail sales of the single store in Tai Po international direct store is 3 million 700 thousand yuan, which is more than 10% higher than that in the same industry second.

For Tao Bo international, its performance is highly dependent on Adidas and Nike, which is both an advantage and a disadvantage.

In recent years, the share of international sports brand in domestic market has been increasing. According to frost Sullivan report, from 2014 to 2018, the market share of international sports brand in China's sports footwear retail market has increased from 46% to 54%, and is expected to grow further to 59% in 2023.

"China's sports shoes and clothing will have huge growth potential in the future, but it will also gradually split up. The high-end high-end premium market will be firmly grasped by high-end brands, and other brands will not be able to enter the market."

In the 2017 fiscal year, 2018 fiscal year and 2019 fiscal year, the international business revenue of Tao Po was 21 billion 690 million yuan, 26 billion 550 million yuan and 32 billion 560 million yuan (RMB), respectively. The annual compound growth rate was 22.5%, with net profit of 1 billion 317 million yuan, 1 billion 436 million yuan and 2 billion 200 million yuan respectively, with a compound annual growth rate of 29.2%. As a multi-year partner of Nike and Adidas, the rapid development of Tao Bo international can also be complied with the general trend of the change of consumer preferences.

However, it is widely believed that Adidas and Nike account for a high proportion of their operating income, which is equivalent to "putting eggs in one basket". If the sales growth of the two brands is slowing down or there are negative events, the impact on the company's performance is self-evident.

In the prospectus, Tao Bo international also said that the company's performance largely depends on the marketing ability of the brand partners. Any negative marketing activities may have an adverse effect on the business performance. "Because all our brand partners are foreign-funded enterprises, the national sentiment towards our brand partners will have a negative impact on the sales of these products, which will have a significant adverse impact on our business performance and financial position."

Insiders told China News Weekly that in recent years, Adidas and Nike are also increasing direct outlets in China, which will have a certain impact on the subsequent expansion of the international market.

In the near future, the expansion of Tai Po international stores is also slowing down. According to the prospectus, in fiscal 2017 and fiscal year 2018, 621 stores and 697 stores were booming, while in the 2019 fiscal year, the number of stores increased by only 41. As of the end of May this year, the number of stores decreased by 129 in the first three months.

Chart / screenshot international prospectus screenshots

Although the expansion is slowing down, the digital transformation of high altitude capital to BELLE international has seemed to be effective. According to the prospectus, as of May this year, Tao Bo international has about 2 million 200 thousand registered members. In the four quarters ended August 31, 2018, November 30th and February 28, 2019 and May 31st, members contributed 36.6%, 41.5%, 52.3% and 70.8% of the total retail sales in the international stores respectively.

　 Market capitalization exceeds 4 Baosheng

According to frost Sullivan data, in 2018 retail sales, Tao Bo international is China's largest sports shoes and clothing retailers, the market share is 15.9%, second percentage points higher than 4.3 percentage points. Baosheng international, ranked second, has a market share of 11.6%. The sports shoe clothing retailer ranked third in the market has a market share of only 3.2%. (generally, you can see from the bag which Nike and Adidas are bought by which retailers, YYSPORTS is Baosheng international, TOPSPORTS is Tao Bo international. )

As of October 14th, Baosheng's total market value was HK $14 billion. In terms of market value, there are more than 4 Baosheng international giants. In the past three years, Baosheng international net profit was 570 million yuan, 415 million yuan and 561 million yuan respectively. Its net profit is 2.7 times, 4.36 times and 3.99 times respectively.

"The difference between the two should not be based on the market value, but on the price earnings ratio," Shen said. At present, Baosheng international price earnings ratio is 18.92, and Tao Po international earnings ratio is 22.1. According to Shen Meng, the price earnings ratio of the pair of international sports retailers is at a reasonable level. From the international sports shoes and clothing retailers, Japan's ABC-Mart, American Caleres and Dick sports have a P / E ratio of 20%, 15% and 10% respectively.

From the gross margin, nearly three years, Baosheng international gross profit margin is above 30%, while the international interest rate is above 40%. In addition, from the days of inventory turnover (the less turnover days, the faster the zero inventory / inventory realisation), the stock turnover days in the past three years were all around 103 days, while Baosheng international was close to 150 days, and nearly 50%.

From the number of stores, as of the first half of this year, Baosheng international direct store 5895, 3756 franchisees, a total of 9651 stores, and the gap between the 1.02 of Wang Bo international store. However, the proportion of Baosheng international direct store is only 60%, while that of talpaco international direct store is 80%, which is basically a single brand store of Adidas and Nike.

For the root of the gap between Baosheng international and Tao Bo international, Shen Meng believes that the international advantage of Tao Bo is because its agent's high-end brands account for a large proportion, and BELLE's channel coverage is also more perfect.

Gao Ling capital said that the huge direct retail network brings scale effect, store synergy effect, and strong retail management capability. It is a core competitiveness that is hard to surpass internationally.

　　 High allocations capital or optional exit

In July 2017, when delisting from the privatization of Hong Kong stocks, BELLE became the most popular privatization deal in HK Stock Exchange because of the HK $53 billion 100 million price. Second, the market is also very concerned about how to withdraw from the future of high leverage capital and CDH investment.

With the listing of Tao Bo international, the industry believes that after a year's lock up period, the high leverage capital, either as an investor or behind the trader, will choose to withdraw. At present, the market value of Tao Bo international has exceeded the price of BELLE international privatization of parent company, and high rill capital and CDH investment can basically withdraw from profits.

According to the prospectus, BELLE international is currently owned by Muse Holdings through wholly owned Affiliated Companies Muse B and Muse M, and Muse Holdings has 46.36%, 44.48% and 9.16% shareholding respectively by SAGE entrepreneurs, Hillhouse HHBH and SCBL. Wise entrepreneurs are directly or indirectly held by senior management members of BELLE International; Hillhouse HHBH, the exclusive investment manager of the ultimate controlling party is high allocating capital; SCBL is controlled by CDH investment.

Gao Ling capital is famous for its investment in new economic companies. It has invested in famous companies such as Tencent, Jingdong, American group, Baiji Shenzhou, pharmacy, where to go, Ctrip and other famous companies. 2019 in Hurun's list, Zhang Lei, founder of high allocating capital, ranked 153 at the price of 22 billion yuan.

With regard to the successful operation of BELLE by high allocating capital, BELLE believes that "capital operation has reached a certain stage, only the difference in resource acquisition".

"In fact, investment in BELLE from high allocations capital is not a success. At present, it is just not a loss," the industry insiders told China News Weekly. "Therefore, we can only push the most profitable business line of BELLE to be listed. Listing is to prepare for cash, so the latter will withdraw."

Needless to say, if the high leverage capital withdrawing from the company to Hong Kong stocks is a potential risk to the world.

However, Tao Bo international will still enjoy the bonus of industry development. According to frost Sullivan, from 2014 to 2018, China's per capita annual expenditure on sports shoes and clothing products increased from 106.3 yuan to 168.7 yuan, with a compound annual growth rate of 12.2%. But China's consumption of sports shoes and clothing still has room for growth. In 2018, the annual per capita consumption of sports shoes and shoes accounted for only 12.5% of the annual consumption per capita of all kinds of shoes and clothing, while in the United Kingdom, Japan and South Korea, they were more than 20%.

"Tao Bo international will still enjoy the bonus of the sports footwear industry in China, but in the face of Nike and Adidas's increase in China's Direct stores, it will weaken or lower the bargaining power and the ability of continuous expansion of the upstream business." the industry said, "as a Chinese dealer, the ROE (net asset yield) is higher than Nike and Adidas, which is not normal in itself."

Behind the higher ROE, the high debt ratio is high. According to Oriental Wealth Choice, last year, the average international ROE was 76.78%, the asset liability ratio was 87.98%, the average ROE of Nike was 42.74%, and the asset liability ratio was 61.88%. According to snowball data, in 2018, Adidas's average ROE was 22.29%, and its asset liability ratio was 59.19%.