XTEP International IPO Financing $286 Million, Pricing At The Low End

People familiar with the matter said on Wednesday that Xtep International Holdings Ltd. (1368.HK), known as XTEP international, raised $286 million through Hongkong's initial public offering (IPO), which is priced at the lower end of the price range of International.

The Chinese sportswear manufacturer and retailer sold 550 million new shares, accounting for 25% of the expanded share capital, issuing HK $4.05 per share.

The company had previously set a price range of HK $4.05-5.50.

One of the people familiar with the matter said that for the 90% part of the institutional issue, all subscriptions were made, while the issue for retail investors was three times subscribed.

The IPO has the right of excess allotment, which can exceed 82 million 500 thousand shares, equivalent to 15% of the original issue scale.

According to the data provided by Thomson Reuters, the expected price earnings ratio of HK $520 million in 2008 is 17 times that of XTEP international, which is lower than the market leader Reuters (Li Ning Co.) 31 times and Anta Sports Products Limited (Anta Sports Products Ltd.) 25 times the price earnings ratio (Reuters).

The valuation of Lining and Anta sports has dropped slightly, because the stock price of both companies has fallen 6%-8% since XTEP international began bidding in May 15th, exceeding the benchmark index's 5% decline in the same period.

Analysts say XTEP international is positioning itself as a popular sportswear brand rather than a traditional sports product brand, so the pricing should be more discount than peers.

Credit Suisse Group said in a research report that XTEP international is basically not very different from other peers. Other colleagues have also added popular elements in the process of upgrading their brand image.

The report also said XTEP international lagged behind 40%-60% in the sales of brand sports shoes and clothing and the average selling price of its products.

XTEP International said in its prospectus that the company sold 10 million 400 thousand pairs of sports shoes last year, with an average selling price of 70 yuan and 8 million 800 thousand sportswear sales, with an average selling price of 53 yuan.

The company has a 3.4% share in the Chinese sportswear market, second only to the international brand Nike (Nike) and Adidas (Adidas).

The company is an exclusive distributor of Disney Sport brand in China, and also produces other Sport brand products.

XTEP international will be listed on the Hongkong stock exchange in June 3rd. The IPO will be used for advertising, distribution network expansion, brand acquisition and working capital.

JPMorgan Chase & Co. (JPM) and UBS AG (UBS) of Morgan are the bookkeeping offices of IPO.