Food importer Cool Link (08491) has taken an important step in the path of diversification.

On December 27, Cool Link issued a voluntary announcement stating that it has signed a memorandum of understanding with Ganzhou Dream Sports Sporting Goods Co., Ltd. (hereinafter referred to as "Dream Sports") for a potential strategic cooperation plan, agreeing to establish a comprehensive partnership to jointly develop businesses in China and overseas for complementary advantages and mutual benefits.

The potential cooperation plan mainly includes two aspects: First, Cool Link will leverage its CNI Resource Index to serve as the overseas agent for Dream Sports, providing brand establishment and investment attraction services, and assisting Dream Sports in financing, share reform, and listing efforts. Second, Dream Sports will utilize its many physical stores, extensive sales network, and brand influence to assist Cool Link in promoting its business domestically, and Cool Link will become the national agent for Dream Sports in the domestic market.

After the public announcement of the cooperation intention, Cool Link's opening price rose by 12.78% on the morning of the 30th. Meanwhile, the Research Reports released by Huazhong Securities International on the morning of the 30th stated that recently, due to the growing demand for food supply and resource Transportation in the Asia-Pacific market, the market expects Cool Link's main business to achieve good growth, driving the company's stock price up. Based on the performance forecast for Cool Link, reasonable valuation levels, and the expected fluctuations of the benchmark Index, Huazhong Securities International has given it a "Recommend (First Time)" investment rating.

Public information shows that Dream Sports is currently the only wearable technology brand in China serving end consumers through chain franchising, with nearly 1,000 franchise stores, offering a range of products including various styles of sports shoes, customized equipment, bags, belts, glasses, and other related products.

Through this strategic cooperation, Cool Link has not only become Dream Sports' overseas agent but also the national agent for Dream Sports in the Chinese market. This means that Cool Link has opened up a new track in footwear and apparel products, which is an important strategic layout to seize opportunities in the athletic footwear industry and create a second growth curve, expanding the company's future potential.

Moreover, with the steady recovery of Cool Link's main business in providing supply distribution services, Cool Link is expected to enter a dual-driven development phase, and its intrinsic value is also expected to be revalued.

Partnering with Zudreams, seizing the rapid development opportunities in the Sporting Goods industry.

Currently, China's Sporting Goods industry is ushering in an important period of development opportunities. With the enhancement of health awareness and the rise of exercise trends, as well as fashion concepts breaking the traditional functional boundaries of athletic footwear, consumer demand for athletic footwear is continuously increasing.

Under the influence of the national trend culture, from 2018 to 2023, China's athletic footwear market size has grown from 269.1 billion yuan (same unit below) to 385.8 billion yuan. Although the pandemic affected growth from 2020 to 2023, its growth rate still exceeded that of other clothing submarkets. In 2024, the market size of China's athletic footwear is expected to reach 542.5 billion yuan, a significant increase from 2023.

In terms of overseas markets, thanks to a strong domestic supply chain system, China's footwear brands are sold globally with high cost-effectiveness. In 2023, China exported a total of 8.91 billion pairs of footwear products, with an export value of 49.34 billion U.S. dollars.

Globally, the Sporting Goods market is also a fast-growing submarket. According to Euromonitor, from 2018 to 2023, the global Sporting Goods market size grew from 331.2 billion U.S. dollars to 395.5 billion U.S. dollars, with a compound annual growth rate of 4%. Euromonitor projects that by 2028, the global Sporting Goods market size will reach 544 billion U.S. dollars, meaning the compound growth rate from 2023 to 2028 will rise to 7%, and demand growth will further accelerate.

The massive market worth hundreds of billions of dollars is expected to continue growing at high single digits in the coming years, providing vast growth space for the development and expansion of China's Sporting Goods brands. The technology-focused brand Zudreams is a leading player in the domestic Sporting Goods market and has successfully seized the rapid growth opportunities in this sector.

Public information shows that Zudreams has opened brand direct stores, joint venture stores, and franchise stores nationwide. After joint online and offline promotions, in just one year, the number of Zudreams franchise stores has approached a thousand, ranking first in both influence and market share in China's technology athletic footwear market. Furthermore, Zudreams is currently the only technology-focused brand serving end consumers through chain franchise stores nationwide.

In addition, Zudream is actively promoting its overseas Business. It is reported that Zudream's revenue will exceed 100 million yuan in 2024 and plans related to entering the Capital Markets are underway. Clearly, Zudream urgently needs to rapidly scale up to seek a higher valuation during the IPO, therefore accelerating market expansion both domestically and internationally has become its priority.

Industry insiders state that starting in 2025, Zudream will allocate greater resources to accelerate the expansion of overseas markets, while simultaneously extending its reach into the European and American markets from its base in Asia. By 2026, its standardized physical stores in China will increase to 5000.

Such rapid planning is attributed to Zudream's products having differentiated competitive advantages, with a net margin close to 30%. With this competitive advantage, its products are expected to accelerate market penetration.

According to reports, Zudream's main products currently include basic sneakers, fitness sneakers, technology sneakers, and customized options, along with five categories of peripheral products. Among the first three product types, a series of functions such as promoting human microcirculation and sterilization and deodorization can be achieved through technology and special processes. The realization of these functions is mainly due to Zudream's three core technologies: small molecule chemical technology, negative magnetic moxibustion technology, and tourmaline stone-nano fabric.

Zudream chose Cool Link as its overseas agent because Cool Link has been deeply engaged in the food import sector for over 20 years and has established a wide and rich Distribution Channel globally, including various types of customers such as ship suppliers, trading companies, and retailers. With rich import and export experience and channel advantages, Cool Link is expected to help Zudream quickly expand its products into overseas markets. Furthermore, after becoming Zudream's national agent in China, Cool Link can also assist Zudream in accelerating domestic market development, thereby facilitating the smooth achievement of its development plans.

For Cool Link, this strategic cooperation means it can benefit from the rapidly growing Sporting Goods Industry, thereby creating a second growth curve and opening up future growth space for the company, which is beneficial in reducing overall Operating risk and laying the foundation for achieving long-term sustainable development.

It is noteworthy that on December 13, Zudream's actual controller, Guo Guixian, increased his Shareholding in Cool Link by 26.865 million shares, at a price of 1.94 Hong Kong dollars per share, with a total amount of 52.1181 million Hong Kong dollars. After this increase, his shareholding ratio in Cool Link will be 6.74%.

This indicates two points: first, the strategic cooperation between Zudream and Cool Link is deeper than the market expectations; second, Zudream has high expectations for the cooperation between the two parties and is bullish about future development.

The recovery of downstream demand is expected to drive the stable rebound of the main Business.

While collaborating strategically with Footminds to create a new growth curve, Cool Link's main Business is also stabilizing and recovering, with the company's fundamentals continuously strengthening.

Founded in 2001, Cool Link mainly distributes various food products, including canned food and packaged beverages in the dry goods category, various Dairy Products in the chilled category, as well as ice cream and frozen cakes in the frozen category, to retail and food service clients (including supermarkets and hypermarkets) and several segments within the food service Industry (such as hotels, resorts, and Restaurants).

After years of development, Cool Link has grown from a small food trading company into one of the largest maritime food suppliers in Singapore, serving approximately 100 ship supply clients. This demonstrates that Cool Link has a substantial presence in the supply distribution Industry in Singapore and holds a leading position in ship supply.

Since the second half of 2024, the market has had high expectations for the stabilization and recovery of Cool Link's main Business, due to the warming of downstream market demand. On one hand, due to geopolitical factors, many vessels are rerouting around the Cape of Good Hope, which has dramatically increased their travel distance, leading to more ships coming to Singapore for replenishment. Data shows that in the first eight months of 2024, 83,855 vessels arrived at Singapore, a year-on-year increase of 4.91%. Under the ongoing impact of geopolitical factors, this trend is expected to continue into 2025.

On the other hand, the significant increase in Chinese tourists visiting Singapore has driven the demand for snacks downstream. Since Singapore officially implemented visa-free entry for Chinese citizens in February 2024, the number of visitors from mainland China reached 2.48 million in the first three quarters of 2024, a year-on-year increase of 146.3%.

According to the Singapore Tourism Board's forecast, Singapore's tourism Industry is expected to continue its recovery in 2024, with inbound tourists increasing to between 15 million and 16 million, generating tourism revenue of 26 billion to 27.5 billion Singapore dollars. Additionally, this recovery trend in the Industry is expected to be further strengthened in 2025, which will lead to increased revenues for the food wholesale retail and Dining tourism sectors, consequently benefiting suppliers.

Cool Link possesses competitive advantages across multiple dimensions, including supplier networks, customer relationships, and product and service delivery, allowing it to benefit from the ongoing growth of downstream demand. In terms of supplier networks, Cool Link has established a vast network with over 200 local and overseas suppliers, providing clients with more than 100 different brands of food products.

In terms of customer relations, Cool Link has established strong relationships with ship supply clients, providing services to some clients for over ten years. At the same time, the company has gradually expanded its Business into the Hong Kong ship supply industry. Regarding product and service delivery, Cool Link's delivery team offers 24-hour round-the-clock delivery service to clients, with products, including refrigerated Dairy Products, deliverable within three hours upon notification. Cool Link's refrigeration facilities and specially equipped delivery vehicles also enhance its advantages in supplying such food.

It can be seen that as downstream demand continues to rebound, Cool Link, which has multidimensional advantages in its main Business, has a high certainty of benefiting from the industry's recovery. It is expected to further increase its market share in Singapore's food supply industry and solidify its leading position in ship supply.

With the continuous advancement of strategic cooperation with Footwear Dreams, Cool Link will open up new growth space, potentially forming a dual-driven development pattern of snack distribution + Outfit distribution, which will clearly enhance the company's intrinsic value and is worth investors' attention.