Conservative estimates increase net profit by 5%
The case that Youngor (600177.SH) acquired 100% equity of Hong Kongâ€™s Xinma Group and SmartApparel Group Limited (the â€œSmartâ€) from KELLWOOD, USA, for US$120 million was nearing completion. This is a rare case of successful acquisition of net assets in overseas mergers and acquisitions by private companies in the Mainland.
Youngor announced yesterday that the company has paid the entire equity transfer payment. This is Youngor's long-lost investment in the main textile and apparel industry. Prior to this, Youngor invested most of his funds in real estate. According to Youngorâ€™s estimates, the two companies acquired this year can increase the companyâ€™s sales revenue by 360 million US dollars and generate a net profit of US$12 million.
Youngorâ€™s net profit for 2006 was approximately RMB 1.1 billion. Based on its 140% increase in net profit in 2007, the companyâ€™s net profit will reach RMB 1.5 billion in 2007, which means that this acquisition will provide Youngor at least in 2008. 5% of net profit growth.
According to informed sources, with the current operating level and current production capacity of Xinma and Smart, Youngor will be able to provide a net profit of at least US$20 million per year after its integration. If this is true, the acquisition will provide Youngor with a 10% net profit increase in 2008.
According to statistics, KELLWOOD is a US listed company and is one of the top five clothing giants in the United States. Its menswear business is principally represented by the New Mart Group and Smart. Its business content includes OEM production of world-class brands, US domestic sales, apparel design, and corresponding logistics distribution systems.
The Xinma Group has annual sales of US$100 million. In recent years, the Xinma Groupâ€™s net profit has stabilized at around US$10 million. According to Youngor's relevant executives, the negotiation between the company and KELLWOOD on the acquisition of the New Malaysia Group was first started in 2005. It was because of the price differences between the two parties that it had to be shelved.
In fact, in 2005, KELLWOOD expects that the U.S. economy will experience a certain degree of recession and try to strengthen its professional capabilities. Therefore, KELLWOOD expressed its desire to sell the men's clothing department including the Malaysian Group. After the first negotiations with Youngor were discontinued, in 2007, due to the economic recession in the United States, the performance of KELLWOOD's men's clothing sector fell. As a result, there was another intention to sell.
According to related sources, the processing brands of Xinma Group and Smart are the top four international brands including the famous POLO. In addition, the company also has sales outlets and sales networks in the United States that reach hundreds of department stores in the United States. These are the strong support for Younger's future entry into the US market.
According to the reporterâ€™s understanding, many brokerages have gone to Ningbo Youngorâ€™s headquarters to investigate the details of the acquisition. GF Securities also issued a research report, saying that after Younger acquired Smart, through the integration of its resources, the company's gross profit margin can be increased, because the same product processing fees, Smart is about 2 times Younger.
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