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OPINION

ChainTek sprints onto Aim

ChainTek sprints onto Aim
August 20, 2012
ChainTek sprints onto Aim

According to research, the Chinese sportswear market was worth £12.5bn in 2011 and will keep growing by up to 20 per cent a year. Big multi-nationals such as Nike, adidas and Puma are popular there, but local manufacturers including Li Ning and Anta each took over 7 per cent of the market last year, and ChainTek reckons big global logistics companies are more focused on export markets and ignore these domestic firms. What's more, the Chinese government is putting its might behind the country’s logistics sector, and predictions are it will double during the current 'five-year plan' that ends in 2015.

ChainTek already runs a highly efficient operation. Its lorries pick up finished goods from several local manufacturers and take them to a warehouse in Jinjiang. From there, vehicles operated by another trucking firm deliver them around the country and pay ChainTek a commission. In 2011, the firm shipped 168,000 tonnes of goods, almost twice as much as the year before.

Of its biggest clients, responsible for more than 90 per cent of revenue, 14 have outsourced 40-60 per cent of their logistics services to ChainTek over the past three years. Revenue jumped over 50 per cent to more than £26m in 2011 and margin of 76 per cent generated pre-tax profit of £13.8m. The logistics business grew 30 per cent in the first half of this year, too - not bad considering economies are slowing everywhere – and the much smaller inventory unit tripled. Current trading is "strong".

A pre-float placing at 160p a share has already raised £7.5m, valuing the business at around £87.5m, much more than UK haulier Wincanton. It could be worth even more if all goes to plan. Founder Shufang Zhuang and his wife have a truckload of faith. They own more than two-thirds of the business, but have promised not to sell for at least a year and even then only enough to satisfy demand. Investec Asset Management has taken a 3.4 per cent stake worth £2.6m, too.

Growing market share in the sports sector and branching out into other areas will be crucial. Chinese logistics is a highly fragmented market – none of the 700,000 firms involved has more than a 2 per cent share– yet ChainTek has little competition locally and filling its trucks with more building materials, food, toys and umbrellas looks like the next step.

Manufacturers are also looking to save costs by outsourcing packing, sorting, labelling and short term storage. That’s why proceeds from the float – about £6m after fees – plus a slug of new debt will pay for new warehouses dotted around the country, which should also improve customer loyalty and keep driving stellar growth at the inventory division.