Special gains to enhance dividend
After the announcement of the sale of one of its apparel brands,KENTEX on 27 Oct 2015, Texwinca is disposing another unusedtrademark, KACO, to an independent third party. The considerationof sales of KENTEX is HKD110m while it is HKD140m for KACO.Texwinca holds 64% of subsidiaries, which own both trademarks.We expect special gains of HKD160m.
These two deals unlock hidden value of the group. The gains willenhance Texwinca’s FY16 earnings by 7.0% and 8.8%, respectively.KENTEX and KACO are the sub-brand under “Baleno” and they areinactive. We do not expect the transactions will have anysignificant impact on the brand’s image and retail business. In fact,these deals are in-line with the group’s strategy to consolidate itsretail business.
We believe the board will likely share this special gain withshareholders and dividend yield will be boosted to 10.8% from 9.3%at recent close (HKD7.83).
Remain BUY
We believe Texwinca will benefit from this deal and maintain ourBUY call with unchanged TP of HKD10.20. Our TP is based on 14.0x2016 PER, which is slightly lower than its peer average (to reflectthe retail business’ risks). The share price rose 11% since theKENTEX disposal announcement on 27 Oct 2015, outperforming HKlisted peers in the period. The stock now trades at just 10.7xFY3/2016 PER and the group will announce its interim end of Nov.
Special gains to enhance dividend
After the announcement of the sale of one of its apparel brands,KENTEX on 27 Oct 2015, Texwinca is disposing another unusedtrademark, KACO, to an independent third party. The considerationof sales of KENTEX is HKD110m while it is HKD140m for KACO.Texwinca holds 64% of subsidiaries, which own both trademarks.We expect special gains of HKD160m.
These two deals unlock hidden value of the group. The gains willenhance Texwinca’s FY16 earnings by 7.0% and 8.8%, respectively.KENTEX and KACO are the sub-brand under “Baleno” and they areinactive. We do not expect the transactions will have anysignificant impact on the brand’s image and retail business. In fact,these deals are in-line with the group’s strategy to consolidate itsretail business.
We believe the board will likely share this special gain withshareholders and dividend yield will be boosted to 10.8% from 9.3%at recent close (HKD7.83).
Remain BUY
We believe Texwinca will benefit from this deal and maintain ourBUY call with unchanged TP of HKD10.20. Our TP is based on 14.0x2016 PER, which is slightly lower than its peer average (to reflectthe retail business’ risks). The share price rose 11% since theKENTEX disposal announcement on 27 Oct 2015, outperforming HKlisted peers in the period. The stock now trades at just 10.7xFY3/2016 PER and the group will announce its interim end of Nov.
