Chinese children’s outdoor apparel manufacturer Camkids Group has announced plans to float on London's Aim market in a bid to strengthen its brand, expand production capacity and extend its network of shops across China.
Dealings are expected to start on 24 December with an anticipated market capitalisation of £65m. Pitched as a western brand to Chinese consumers, Camkids started life as a shoe manufacturer in 1994 before starting its own product line in 2001. It now designs, manufactures and sells outdoor apparel, footwear and equipment for Chinese children through 1,000 retail outlets across the country.
The company has an 11.1 per cent market share of total sales in its sector, ranking second after Nike. In the year to December 2011, it generated revenues of RMB742m (£74m), pre-tax profits of RMB213.7m (£21.1m), with a gross margin of 42.9 per cent.
And while China's one-child policy means the number of children is declining, management claims parents are willing to spend more money on their only offspring, so expenditure on children's apparel and footwear is actually estimated to double by 2016.
Matt Butlin, research analyst at Allenby Capital, expects 20 per cent top-line growth over the next two years.
The big risk here is that China's economy slows. The upside is that having only touched the tip of the consumer iceberg, Camkids' potential for sustained double-digit growth is huge, while gross margins are high. The company intends to pay dividends at 20 per cent of earnings, which would equate to a 5 per cent yield in 2013. It's coming to the market on a low valuation, forecast at 3.4 times 2012 earnings, so there could be potential for a substantial uplift. One to watch.