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PR Newswire
07-01-2020, 09:13 AM
Kingmaker Footwear is HK-listed a contract manufacturer of shoes whose main customers are Asics, Clarks, Quiksilver, and Sketchers.
Its factories are located in Vietnam, Cambodia, and China, with Vietnam's plant contributing about 68% of sales, and Cambodia's plant contributing about 16% of sales. From its latest interm results, its plant in China continues to decrease its production.
Its main customers used to be from US and EU, which made up 90% of sales. But Asia is now its main customer with 40% of sales, followed by EU with 31% of sales, and US with 12%.
Kingmaker -- which is one of Webb's chips -- has been suffering since the past year from poor sales and margins, resulting in profits and dividends being severely impacted. Its production volume has also shrunk from 25m pairs of shoes in 2013, to about 10m pairs of shoes in 2019. Its profits, dividends, and share price are now at 10-year lows.
The company had a very good run over the past 10 years as a Webb chip; distributing about 90% of its profits as dividends to shareholders. It looks like the BOD is friendly to opmi, but will the business and its once-high dividends ever recover?
Shoe manufacturing is likely to be an ever-green business, but it is also a business with low-barriers, and hence, numerous competitions. To thrive, Kingmaker has to deliver the best quality products, at the lowest cost. While the company has long shifted production to lower-cost locations, the decrease in production volume over the years has eroded any possible gains from larger production scale.
Its latest 6m results ending September 2019 registered a HK35m loss. Nevertheless, a 2 cent special dividend was paid out, and management has a "cautiously optimistic outlook for the current financial year."
For now, the market is valuing the company at about HK$670m, which is below the combined value of its net cash (HK$528m) and investment properties (HK$235m). This implies that the shoe manufacturing business is -- more or less -- going for free.
Its factories are located in Vietnam, Cambodia, and China, with Vietnam's plant contributing about 68% of sales, and Cambodia's plant contributing about 16% of sales. From its latest interm results, its plant in China continues to decrease its production.
Its main customers used to be from US and EU, which made up 90% of sales. But Asia is now its main customer with 40% of sales, followed by EU with 31% of sales, and US with 12%.
Kingmaker -- which is one of Webb's chips -- has been suffering since the past year from poor sales and margins, resulting in profits and dividends being severely impacted. Its production volume has also shrunk from 25m pairs of shoes in 2013, to about 10m pairs of shoes in 2019. Its profits, dividends, and share price are now at 10-year lows.
The company had a very good run over the past 10 years as a Webb chip; distributing about 90% of its profits as dividends to shareholders. It looks like the BOD is friendly to opmi, but will the business and its once-high dividends ever recover?
Shoe manufacturing is likely to be an ever-green business, but it is also a business with low-barriers, and hence, numerous competitions. To thrive, Kingmaker has to deliver the best quality products, at the lowest cost. While the company has long shifted production to lower-cost locations, the decrease in production volume over the years has eroded any possible gains from larger production scale.
Its latest 6m results ending September 2019 registered a HK35m loss. Nevertheless, a 2 cent special dividend was paid out, and management has a "cautiously optimistic outlook for the current financial year."
For now, the market is valuing the company at about HK$670m, which is below the combined value of its net cash (HK$528m) and investment properties (HK$235m). This implies that the shoe manufacturing business is -- more or less -- going for free.
