Xingquan wins over foreign funds

KUALA LUMPUR: Fund managers, notably foreign ones based in Europe and the US, have been buying into China-based shoe and shoe sole maker Xingquan International Sports Holdings Ltd, according to its corporate finance chief Ooi Guan Hoe.

“We have ongoing investor relations (IR) activities and analyst briefings. From July 2009 till June 30, 2010, we have met more than 80 fund managers. Our company puts a lot of emphasis on IR activities,” Ooi told journalists yesterday after Xingquan’s annual general meeting.

Ooi said these heightened IR activities have borne fruit. Xingquan’s latest annual report 2010 listed the Bank of New York Mellon among its 30 largest shareholders with a 3.2% stake or 9.85 million shares as at Nov 1, while European bank KAS Bank Effectenbewaargeorijf NV held a 1.13% stake or 3.47 million shares.

“Two weeks ago we also had another fund from Holland which came to visit us. When these foreign banks do their road shows in China — Hong Kong and Shanghai — they will pay us a visit. On average, every month we have investors from China, Taiwan, South Korea, Hong Kong or even Europe. We even have news magazine from the US which (recently) came to visit us,” Ooi added.

“If you notice in the (shareholders) list, we also have certain high net worth individuals who have bought into our company. Even the Employees Provident Fund has stakes in the company. We also have CIMB,” he said.

Analysts said Chinese footwear manufacturers have been trading at low price-to-earnings multiples despite their market potential in China and expansion opportunities, given the country’s growing middle class. Xingquan has a forward PER of 3.68 times, XiDeLang Holdings Ltd 1.77 times, Multi Sports Holdings Ltd (XDL) 3.27 times and K-Star Sports Ltd 1.1 times, compared with the FBM KLCI’s 17 times.

Analysts also noted that China-based companies listed here have been cast in a negative light due to a number of scandals among Singapore-listed China-based companies and perhaps because of the language barrier. Xingquan was the first China-based company to list on Bursa Malaysia in July last year.

Sources said XDL and Multi Sports’ management are contemplating a total revamp of their IR team, to empower the team with more qualified English-speaking personnel to reach out to institutional investors in Malaysia and around the world.

“It does seem to me that these China-based companies are beginning to learn from these past experiences. Sometimes, communication is the only barrier because these Chinese shoemakers are in a sweet spot, given China’s bright macroeconomic fundamentals,” a senior analyst with OSK Research House said.

“These companies have qualified and established auditors who have gone to the ground to view their operations and have certified them as genuine. In any business, the most important thing is that there is demand for your products, and these Chinese companies have got it in China,” the analyst said.

“Many people especially local investors are not aware that China-based companies like XDL, K-Star, and Xingquan’s major shareholders did not sell down their existing shareholding stakes when they listed their businesses in Malaysia — all the funds went to the business itself. This shows their long-term commitment to the business,” another analyst who covers Chinese shoemakers said.

For FY10 ended June 30, profit after tax rose 21.2% to RM103.8 million from RM85.7 million in FY09. Revenue was up 51.1% to RM609.3 million.