What do all athletes at the coming Beijing Olympics need? They need to be clothed in sportswear and apparel of course. And China Taisan Technology Group Holdings (CT), which just got listed on the Mainboard on June 6, is a manufacturer of knitted fabric for such sportswear and apparel.

CT launched its initial public offer (IPO) of 233m shares at $0.24 cents each. The 233m shares comprise 223.2m new shares and 9.8m vendor shares. The IPO aimed to net $49.4m in proceeds for the company, which it planned to use to acquire new equipment ($38.2m), expand research and development (R&D) ($1.6m), set up new sales and service centers ($4.3m), fund marketing & advertising expenses ($2.3m) and for working capital ($3m).

The offer consisted of 8m public-offer shares and 225m placement shares. The invitation shares represented 25.11% of CT’s enlarged share capital were offered at a historic price-earnings ratio (PER) of 4.7 times, based on its FY07 net earnings. Fibrechem Technologies, which manufactures chemical fibre, was traded at $0.71 on June 3 with a PER of 6 times. In comparison, CT appeared more affordable and attractive.

EXPANSION PLANS
CT said the bulk of the proceeds ($38.2m) will be used to acquire multi-track electronic tubular knitting machines, new face finishing and processing equipment to make peach finish fabrics, and computerised jacquard knitting machines.

Besides expanding R&D, the company will set up sales and servicing centers in Shanghai, Hong Kong and Xiamen, and boost marketing activity.

From FY05 to FY07, the company’s revenue grew at a compounded annual growth rate (CAGR) of 168% from Rmb112m to Rmb811m while its earnings grew from Rmb14m to Rmb183m at a 259% CAGR. FY07 earnings jumped 388% from FY06’s Rmb37m due mainly to higher sales of performance fabric.

FABRIC USED BY WELL-KNOWN BRANDS
CT’s knitted fabric is used in the manufacture of sports and leisure apparel by international and China’s local sports brands like Adidas, Anta, Bossini, Diadora, Eland, Erima, FILA, Giordano, K-boxing, Kappa, Li-Ning, Lilang, Lotto, Mizuno, Nike, Puma, Qiaodan, Reebok, Septwolves, Wanjielong, and Umbro.

The company’s Chief Executive Officer Lin Wen Chang pointed to the Beijing Olympics in August, the Guangzhou Asian Games 2010 and Shenzhen World University Games 2011 as opportunities that will raise awareness of sports and fitness apparel and spur demand for CT’s products in China.

Lin said, “Reputable apparel brands have also been rolling out new and innovative products with enhanced functions and characteristics, and we believe that will increase demand for our performance fabrics.”

Going forward, CT will focus on performance fabrics. This segment contributed a substantial 93.3% of revenue in 2007 and posted the highest gross profit margin of CT’s 3 business segments at 31.9% for that year.

The acquisition of the equipment is expected to more than double production capacity for Spandex performance fabrics. CT will also expand its product range by introducing new performance fabrics with innovative functions, characteristics and designs.