IT would appear that the market is positively pricing in Hing Yiap Group Bhd's proposed acquisition of a variety of brands, which include Anakku, Audrey and Mickey Junior.
Since its announcement on July 11, Hing Yiap's share price had jumped more than 50 sen to RM2.10 as of Friday.
Garments manufacturer Hing Yiap has proposed to acquire six subsidiaries of Asia Brands Corp Bhd (ABCB) for RM245mil in cash and shares. The subsidiaries are involved in clothing for babies, children and women.
The subsidiaries to be acquired were Anakku Sdn Bhd, Audrey Sdn Bhd, Mickey Junior Sdn Bhd, Asia Brands Global Sdn Bhd, Asia Brands Assets Management Sdn Bhd and Asia Brands HR Services Sdn Bhd, it said in an exchange filing on Thursday.
“On the surface, it is definitely positive as it will widen Hing Yiap's product portfolio and market reach. Anakku is generally a well perceived and well known brand in the market. Now, Hing Yiap is getting an immediate foothold in the babies market,” said one consumer analyst.
Another analyst said the acquisitions of Anakku and Audrey were in line with Hing Yiap's direction of supplying to the mass market.
“Growth in Hing Yiap hasn't been fantastic but it has been steady. With Anakku, the number one babies apparel brand, there might be an acceleration in its earnings moving forward,” said the analyst.
The acquisition would be paid for in RM179.3mil cash and the balance RM65.7mil in 30.14 million new ordinary shares of RM1 each in Hing Yiap at an issue price of RM2.18 per share, the company said.
According to Hing Yiap's announcement, Anakku's positioning in the baby apparel market is similar to Baby Kiko and Baby Poney in Malaysia. These brands target the mass market with a lower price range when compared with the premium brands.
Luxury brands such as Pumpkin Patch, Baby Gap, and Carter's target consumers of higher income with its premium branding and prices.
Anakku is the leading baby apparel brand in Malaysia, both in terms of revenue and number of points-of-sale in Malaysia, in 2010. Anakku Sdn Bhd recorded revenue of RM120.04mil for its financial year (FY) ended 2010, and RM122.99mil for FY 2011.
Compared with its industry peers' performances in FY10, the company commands about a 28% of the total market share for baby apparel in Malaysia, and 19% of the points-of-sale in this sector.
Meanwhile, Audrey's positioning in the women's lingerie market is also towards the mass market.
According to Bursa's announcement, Audrey Sdn Bhd reported revenue of RM64.66mil for FY10 and RM83.58mil for FY11.
Based on 2010 figures, the company commands a market size of 12.9% of the women's lingerie sector in Malaysia.
In terms of revenue for lingerie products, Audrey is ranked second after Body Fashion (M) Sdn Bhd, the company that distributes and retails the Triumph brand.
In terms of points-of-sale, Audrey leads the industry sector, with almost 21.0% market share. It is ranked second in terms of revenue and first in terms of points-of-sales,
Hing Yiap's operations cover textile manufacturing, garment making, wholesaling, retailing, distributorship, franchising and sub-licensing within a synergistic group of complementary businesses.
It manufactures and markets its own apparel house brands as well as international labels such as Antioni (sports-inspired fashion), Bontton (casual wear), Diesel (street fashion), B.U.M. Equipment (American lifestyle fashion), Unionbay (sporty denim label). In addition, there is BUMCITY, a specialty lifestyle chain-store targeting teenagers and young adults.
According to its website, the company manufactures about 750,000kg of fabric a year and about 3.5 million pieces of garment per annum using state-of-the-art equipment imported from Germany and Japan.
The marketing company on the other hand sells about seven million pieces of apparel a year, in its own label as well as international labels in Malaysia, Singapore and Brunei.
For its third quarter ended March 31, the company recorded a 2.6 times jump in net profit to RM2.54mil from RM918,000 previously.
For the nine-month period, net profit was up 8.23% to RM14.37mil on the back of a 5.97% decrease in revenue to RM105.26mil. The company has RM24.89mil in cash for the period under review.
The company's net asset per share improved to RM2.70 from RM2.39 previously.
The company's earnings have been growing over the last five years. From a net profit of RM4.52mil for its financial year (FY) ended June 30, 2007, this has increased to RM13.45mil as of FY11 or a compounded annual growth rate of some 24%.
When the company announced its results earlier this year, it had reduced inventory levels to RM52.9mil from RM78.3mil and this has resulted in an increased cash balance of RM26.6mil as compared to cash balance of RM700,000 in the preceding year.
“Further initiatives will be carried out to improve inventory levels and to enhance cost optimization. There will also be more branding activities planned this year to improve top line performance,” said Hing Yiap.