What Is The Main Purpose Of LV Group'S Menswear Company'S Listing In Hong Kong?

GXG Alpha Smart Ltd, the parent company of menswear brand, has submitted the application documents to HKEx recently. Behind Alpha, "stand" LVMH, the world's largest luxury group (hereinafter referred to as LV group).

A share listed companies in 2013

(002563, SZ) in a planned takeover, zhe Mu still had 71% shares, with a paction volume of nearly 2 billion yuan, but the paction ended.

The prospectus document shows that LV group's fund L Catterton and Crescent Point indirectly acquired 70% stake in zhe mu with 2 billion 839 million yuan.

Two years ago, "married" into LV's Fund.

The GXG brand was founded in 2007, but it is really

It is widely concerned that it should be started in 2013.

In June 2013, Semir clothing announced that it was planning to buy 71% stake in zzhe, Yang Herong, Yu Yong, Zhu Zhaoguo, Tu Guangjun and Mao Chunhua. After the completion of the paction, zhe Mu will still become a controlling subsidiary of Semir apparel.

Semir costumes introduced at that time that China zhe Mu Shang had "GXG" and "gxg.jeans" brands, and opened about more than 1200 retail outlets in the mainstream department stores and shopping centers throughout the country, ranking the top three in the sales of men's similar brands such as Wanda, Yintai, Dayang department store and new world department store.

In 2012, China zhe Mu had net assets of 272 million yuan, operating income of 1 billion 398 million yuan, and net profit of 206 million yuan.

The price for Semir's 71% stake is expected to be 1 billion 980 million yuan to 2 billion 260 million yuan.

But this acquisition failed to come true. One of the important reasons is that the market does not recognize the gold content of the GXG brand, and the doubt that GXG is "fake foreign card" is always heard.

Original

After the announcement, the company's share price also encountered investors' "vote by foot".

At the beginning of January 2014, Semir apparel said that the company and the pferor failed to reach agreement on the specific terms of the equity pfer agreement, and the purchase of the equity framework agreement was lifted.

But Zhong zhe Mu did not give up looking for the gold master.

The book of prospectus shows that in January 2016, Yang Herong, a major shareholder, established Alpha by its Updragon company and bought a 70% stake in zhe mousse by Alpha.

Since then, the two private Holdings Company L Catterton and Crescent Point held 73% and 27% respectively to set up a company Glorious Cayman, which bought the Alpha 100% shares through a wholly owned subsidiary (holding a 70% stake in zhe mousse) with a cash price of 2 billion 839 million yuan in October 2016.

According to this calculation, China zhe Mu still has a 100% equity valuation of 4 billion 46 million yuan.

The L Catterton, which indirectly owns Alpha73% shares, is behind the famous LV group.

L Catterton was founded in 1989, and its total assets under management are expected to exceed US $14 billion.

The official website shows that the portfolio of L Catterton currently includes 145 enterprises and has successfully withdrawn from 65 enterprises.

In June 2017, Alpha acquired another 30% stake in zhe Mu Shang's other shareholders. The cash cost was 265 million yuan, and some of these shareholders subscribed to Glorious Cayman1.4 billion shares.

After this series of arrangements and norttene, the listed Alpha will hold a 100% stake in zhe Mu Shang.

Industry: overall downturn in garment industry

As an investment institution, the purpose of L Catterton's investment in Alpha is naturally in return.

So will Alpha's listing in Hong Kong bring an ideal return for investors?

In recent years, the growth rate of Alpha's performance is acceptable in the industry. The company's revenue increased from 2 billion 713 million yuan in 2015 to 3 billion 510 million yuan in 2017, and net profit increased from 345 million yuan in 2015 to 422 million yuan in 2017.

Previous data showed that in 2012, the company's operating income was 1 billion 398 million yuan, and its net profit was 206 million yuan.

In five years, the company's revenue was nearly 3 times that before, and net profit has doubled.

According to net profit only, Semir apparel is about to buy Alpha when its net profit is about 14 times the net profit in 2012. When the L Catterton is acquired, the price earnings ratio is about 12 times that of 2015, so what kind of valuation will the company get?

In fact, the clothing industry is at a low ebb.

Tang Xiaotang, founder of fashion consulting firm No Agency, told the daily economic news reporter that "the overall slowdown in economic and retail growth is accompanied by the overall downturn in the apparel industry, and the Chinese market is too dispersed, and there is no big group and fund to integrate, and it is not optimistic about the future prospects of the brand clothing."

According to the information of burning consultation, Alpha 2017 fashion in China

The occupancy rate is about 3.23%.

As of June 30, 2018, there were 2213 retail outlets under the company, including 708 self operated stores, 538 partnership shops and 967 distribution outlets.

However, judging from the listing documents, the speed of the company's opening up has dropped markedly since 2018.

In 2015~2017, the company has been opening up rapidly, such as 556 stores in 2017 and 336 stores, but in the first half of 2018, the company opened 135 stores and closed 238 stores, with a net reduction of 103.

The main purpose of listing is to repay debts.

At the same time, Alpha's debt is rising rapidly.

The balance sheet shows that in 2017, the "non current liabilities" column increased the "interest bearing bank and other borrowings" by 1 billion 321 million yuan, and this figure increased to 1 billion 338 million yuan in the first half of 2018.

The Hong Kong listed company admitted that the purpose of listing in the first place is to repay debts, and the rest in turn are brand acquisition, upgrading of stores, construction of logistics centers and supplementary working capital.

You know, in 2016, the total liabilities of the company were only 1 billion 439 million yuan, and the net assets were 1 billion 7 million yuan. In 2017, the total liabilities increased to 3 billion 193 million yuan, and net assets turned negative into negative 230 million yuan.

Why is there such a change in liabilities? Alpha said that in September 2017, the company obtained a total of 226 million dollars in bank financing from 12 institutions such as Citibank Hongkong branch.

In order to obtain this financing, the equity interest of the company has been secured.

The loan will expire in 2022, but if L Catterton and its management fund no longer own more than 30% of the company's interest or are no longer the largest shareholder, the loan will expire immediately.

So what is this sudden increase in debt? The company said that as of June 30, 2018, all the money had been withdrawn under the financing, and the proceeds from the loan had been used as an expansion of the capital structure.

The company expects to repay part of the loan by net proceeds from IPO.

In order to adjust the capital structure, large loans are required, and the company's statements are rendered insolvent. One of the main purposes of listing is to repay the loan.

Why is that?