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Retail│Hong Kong
March 25, 2015
COMPANY NOTE
Cosmo Lady
2298 HK / 2298.HK
Market Cap
Avg Daily Turnover
Free Float
US$1,296m
US$0.91m
21.3%
HK$10,047m
HK$8.01m
1,906 m shares
Current
HK$5.27
Target
HK$6.82
Prev. Target
N/A
Up/Downside
29.4%
Conviction|
|
Expansion supports re-rating
Notes from the Field
————————————————————————————————————————
We expect Cosmo Lady to deliver a robust earnings CAGR of 32% over
the next three years, driven by aggressive network and product range
expansion. China’s leading underwear company has a strong financial
position, supporting its potential as the industry consolidator. We also
like its e-commerce strategy and strong cash generating ability.
Paul SNELGROVE
T (852) 2532 1125
E paul.snelgrove@cimb.com
Toby SHEK
T (852) 2532 1119
E toby.shek@cimb.com
Company Visit
Channel Check
Expert Opinion
Customer Views
————————————————————————————————————————
Show Style "View Doc Map"
Contents
We initiate coverage on Cosmo Lady
with an Add rating and DCF-derived
target price of HK$6.82. The company
is expected to add 1,200 outlets for
each of the next three years, enjoy
solid SSSG while offering upside
potential from new brands. We expect,
through a combination of organic
growth and M&A, Cosmo Lady to
raise its market share from 3% in
2014 to 5-10% over the next five years.
BACKGROUND ................................................................... 4
Expanding China footprint
OUTLOOK............................................................................ 5
Cosmo Lady has grown its number of
outlets by an average of 26% over the
past three years, and we forecast an
additional 15% CAGR in organic
outlet expansion until 2017 to 10,600
stores. The company has successfully
grown from a Southern China-based
company into a nationwide play as it
expands in other regions, especially
into tier 3 and 4 cities where the
intimate wear industry is forecast to
deliver an 18% CAGR in sales from
2014-19. In addition to the outlet
expansion, it has developed and
implemented an e-commerce strategy
that will work in synergy with its
offline business.
RISKS ................................................................................. 15
FINANCIALS ...................................................................... 15
VALUATION AND RECOMMENDATION .......................... 18
NOTES FROM THE FIELD ................................................ 20
Price Close
162
5.50
149
5.00
135
4.50
122
4.00
109
3.50
95
3.00
200
82
150
Vol m
100
50
Sep-14
Nov-14
Jan-15
Source: Bloomberg
52-week share price range
5.27
5.68
3.31
6.82
Current
Target
Commanding 2.9% market share in
terms of retail sales, Cosmo Lady is
the clear leader with more market
share than the remaining Top 5 put
together. We like Cosmo Lady’s
positioning in the mass-market as it is
a segment that covers 54% of the
overall underwear market and is
forecast to grow to 62% by 2019.
Recent acquisition of higher-end
brand ‘Ordifen’ (ranked 5th in terms of
China retail sales of bras) could be the
start of a multi-year consolidation
story in a highly fragmented industry.
Re-rating on higher growth
We see a strong 3-year topline CAGR
of 28% with a gradual improvement in
margins from more self-operated
stores. Cosmo Lady is well positioned
to enhance its position as the best way
to play the growth in underwear
spending in China and our DCF-based
target valuation implies a P/E of 17.1x
in FY16 or less than 0.6x PEG. This
compares favourably with global
underwear brands. We see further
upside potential after we factor in the
potential synergies from its recent
acquisition.
Financial Summary
Relative to HSI (RHS)
6.00
Jun-14
Adding product offering
Revenue (Rmbm)
Operating EBITDA (Rmbm)
Net Profit (Rmbm)
Normalised EPS (Rmb)
Normalised EPS Growth
FD Normalised P/E (x)
DPS (Rmb)
Dividend Yield
EV/EBITDA (x)
P/FCFE (x)
Net Gearing
P/BV (x)
ROE
% Change In Normalised EPS Estimates
Normalised EPS/consensus EPS (x)
Dec-13A
2,916
401
275.5
0.18
42.9%
22.96
0.00
0.00%
15.00
49.28
(44.5%)
9.20
42.6%
Dec-14A
4,008
609
425.2
0.25
35.9%
16.89
0.08
1.88%
10.02
NA
(48.3%)
3.59
29.1%
Dec-15F
5,442
871
604.2
0.32
26.9%
13.31
0.10
2.25%
7.88
28.89
(44.3%)
3.02
24.7%
1.06
Dec-16F
6,878
1,128
783.4
0.41
29.7%
10.26
0.12
2.92%
5.67
11.49
(51.2%)
2.51
26.7%
1.09
Dec-17F
8,445
1,395
972.6
0.51
24.1%
8.27
0.15
3.63%
4.39
14.39
(49.1%)
2.07
27.4%
1.10
SOURCE: CIMB, COMPANY REPORTS
IMPORTANT DISCLOSURES, INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT.
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Cosmo Lady│Hong Kong
March 25, 2015
BY THE NUMBERS
Share price info
Share px perf. (%)
1M
3M
Relative
3.7
-7.1
Absolute
2.7
-2.1
12M
P/BV vs ROE
12-mth Fwd FD Normalised P/E vs FD
3.80
40.9%
3.60
32.7%
% held
3.40
24.5%
Mr. Zheng Yaonan & Harmonious
Composition
65.2
3.20
16.4%
Capital Today Investment
10.0
3.00
8.2%
2.80
Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16
0.0%
Major shareholders
Cosmic Vanguard
3.5
Rolling P/BV (x) (lhs)
Normalised EPS Growth
16.00
14.00
12.00
10.00
8.00
6.00
4.00
2.00
0.00
Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16
50.0%
43.8%
37.5%
31.3%
25.0%
18.8%
12.5%
6.3%
0.0%
12-mth Fwd Rolling FD Normalised P/E (x) (lhs)
ROE (See Footnote) (rhs)
Diluted Normalised EPS Growth (rhs)
Profit & Loss
Forecast margin expansion on higher
proportion of self-managed stores
(Rmbm)
Total Net Revenues
Gross Profit
Operating EBITDA
Depreciation And Amortisation
Operating EBIT
Financial Income/(Expense)
Pretax Income/(Loss) from Assoc.
Non-Operating Income/(Expense)
Profit Before Tax (pre-EI)
Exceptional Items
Pre-tax Profit
Taxation
Exceptional Income - post-tax
Profit After Tax
Minority Interests
Preferred Dividends
FX Gain/(Loss) - post tax
Other Adjustments - post-tax
Preference Dividends (Australia)
Net Profit
Normalised Net Profit
Fully Diluted Normalised Profit
Dec-13A
2,916
1,069
401
(30)
371
3
0
(0)
375
Dec-14A
4,008
1,568
609
(38)
571
12
0
5
587
Dec-15F
5,442
2,193
871
(61)
810
24
0
0
835
Dec-16F
6,878
2,848
1,128
(80)
1,048
34
0
0
1,082
Dec-17F
8,445
3,562
1,395
(99)
1,296
48
0
0
1,344
375
(99)
587
(162)
835
(231)
1,082
(299)
1,344
(371)
276
0
425
0
604
0
783
0
973
0
276
276
276
425
425
425
604
604
604
783
783
783
973
973
973
Cash Flow
We forecast strong FCF generation
over the next 3 years
(Rmbm)
EBITDA
Cash Flow from Invt. & Assoc.
Change In Working Capital
(Incr)/Decr in Total Provisions
Other Non-Cash (Income)/Expense
Other Operating Cashflow
Net Interest (Paid)/Received
Tax Paid
Cashflow From Operations
Capex
Disposals Of FAs/subsidiaries
Acq. Of Subsidiaries/investments
Other Investing Cashflow
Cash Flow From Investing
Debt Raised/(repaid)
Proceeds From Issue Of Shares
Shares Repurchased
Dividends Paid
Preferred Dividends
Other Financing Cashflow
Cash Flow From Financing
Total Cash Generated
Free Cashflow To Equity
Free Cashflow To Firm
Dec-13A
401
Dec-14A
609
Dec-15F
871
Dec-16F
1,128
Dec-17F
1,395
(109)
30
6
(0)
3
(111)
221
(76)
(668)
0
0
5
12
(162)
(205)
(131)
(187)
0
0
36
0
0
(313)
0
0
24
(231)
478
(200)
34
(299)
900
(200)
48
(371)
759
(200)
10
(66)
(27)
0
1
(129)
0
1,549
0
(200)
0
0
0
(200)
0
0
0
(200)
0
0
(181)
(235)
(292)
0
(181)
97
278
278
0
(235)
465
700
700
0
(292)
267
559
559
(48)
30
(45)
110
128
157
0
(425)
1,125
791
(334)
(334)
SOURCE: CIMB RESEARCH, COMPANY
2
Cosmo Lady│Hong Kong
March 25, 2015
BY THE NUMBERS
Balance Sheet
Strong net cash position
(Rmbm)
Total Cash And Equivalents
Total Debtors
Inventories
Total Other Current Assets
Total Current Assets
Fixed Assets
Total Investments
Intangible Assets
Total Other Non-Current Assets
Total Non-current Assets
Short-term Debt
Current Portion of Long-Term Debt
Total Creditors
Other Current Liabilities
Total Current Liabilities
Total Long-term Debt
Hybrid Debt - Debt Component
Total Other Non-Current Liabilities
Total Non-current Liabilities
Total Provisions
Total Liabilities
Shareholders' Equity
Minority Interests
Total Equity
Dec-13A
306
262
404
0
972
199
0
100
36
335
0
Dec-14A
1,081
606
639
0
2,325
271
0
119
54
444
0
Dec-15F
1,178
657
786
0
2,620
372
0
157
54
583
0
Dec-16F
1,642
767
981
0
3,391
458
0
191
54
703
0
Dec-17F
1,909
833
1,159
0
3,902
529
0
221
54
804
0
409
211
620
0
480
52
531
0
310
233
543
0
599
287
885
0
472
343
816
0
0
0
0
620
688
0
0
0
531
2,238
0
0
0
543
2,660
0
0
0
885
3,209
0
0
0
816
3,890
688
2,238
2,660
3,209
3,890
Dec-13A
29.2%
47.5%
13.8%
0.20
0.46
261.3
26.5%
NA
21.99
72.28
45.14
64%
57.0%
Dec-14A
37.4%
51.7%
15.2%
0.57
1.17
N/A
27.6%
35.6%
20.56
78.00
36.59
108%
39.9%
Dec-15F
35.8%
43.1%
16.0%
0.62
1.40
N/A
27.6%
30.0%
20.56
80.00
20.80
51%
34.1%
Dec-16F
26.4%
29.5%
16.4%
0.86
1.68
N/A
27.6%
30.0%
20.61
80.22
22.21
51%
36.9%
Dec-17F
22.8%
23.6%
16.5%
1.00
2.04
N/A
27.6%
30.0%
20.56
80.00
24.35
60%
37.9%
Dec-13A
N/A
N/A
5,790
0.7%
N/A
N/A
N/A
N/A
Dec-14A
N/A
N/A
7,026
11.8%
N/A
N/A
N/A
N/A
Dec-15F
N/A
N/A
8,226
14.1%
N/A
N/A
N/A
N/A
Dec-16F
N/A
N/A
9,426
9.2%
N/A
N/A
N/A
N/A
Dec-17F
N/A
N/A
10,626
8.1%
N/A
N/A
N/A
N/A
Key Ratios
Inventory days increasing on the back
of higher proportion of self-operated
stores
Revenue Growth
Operating EBITDA Growth
Operating EBITDA Margin
Net Cash Per Share (Rmb)
BVPS (Rmb)
Gross Interest Cover
Effective Tax Rate
Net Dividend Payout Ratio
Accounts Receivables Days
Inventory Days
Accounts Payables Days
ROIC (%)
ROCE (%)
Key Drivers
SSSG here is average revenue per
store growth, skewed due to the
significantly higher revenue per
self-operated store
ASP (% chg, main prod./serv.)
Unit sales grth (%, main prod./serv.)
No. of POS (main prod/serv)
SSS grth (%, main prod/serv)
ASP (% chg, 2ndary prod./serv.)
Unit sales grth (%,2ndary prod/serv)
No. of POS (2ndary prod/serv)
SSS grth (%, 2ndary prrod/serv)
SOURCE: CIMB RESEARCH, COMPANY
3
Cosmo Lady│Hong Kong
March 25, 2015
Expansion supports re-rating
BACKGROUND
Leading underwear brand in China
Cosmo Lady was founded by the management in 1998 in Shenzhen and has
established itself as the largest underwear brand in China with approximately
2.9% market share in 2014, according to Frost & Sullivan. In a fragmented
market, Cosmo Lady’s market share is more than the combined market share of
the next four largest players which totaled 2.8% of market share, including
Embry (1388 HK), Aimer, Huijie (both non-listed) and Ordifen (now owned by
Cosmo Lady).
Figure 1: China's underwear market by retail sales (2014)
Other top 4 players,
2.8%
Cosmo Lady, 2.9%
Other players, 94.3%
SOURCE: CIMB, Frost & Sullivan
The company operates both franchised stores and self-operated stores,
exceeding over 7,000 total outlets as at end-2014. The company has employed
Taiwanese model/actress Lin Chi-ling as its spokesperson/endorser since 2012,
and as part of its push into men’s underwear, mainland singer/actor Huang
Xiao-ming was also signed up. Both stars are extensively used in its marketing
material.
Figure 2: Spokesperson Lin Chi-ling
Figure 3: Spokesperson Huang Xiao-ming
SOURCE: COMPANY
SOURCE: COMPANY
4
Cosmo Lady│Hong Kong
March 25, 2015
Listed in mid-2014
Cosmo Lady was listed on the Hong Kong Stock Exchange in Jun 2014 at
HK$3.60/share, raising net proceeds of HK$1.4bn. The main uses of the
proceeds were identified as 40% for retail network expansion, with the
company looking to increase the proportion of stores that are self-managed as
opposed to those operated by franchisees. A further 25% was earmarked for the
development of three new logistics centres in Dongguan, Tianjin and
Chongqing to boost its nationwide logistics and distribution efficiency.
Currently the four executive directors of the company hold a 63.2% stake in
Cosmo Lady through holding company, Harmonious Composition (the
chairman holds a further 2% on his own, most of which is in trust for employees
of the company). Pre-IPO investors Capital Today and Cosmic Vanguard (CICC)
own 10% and 3.5% of the company respectively.
Figure 4: Cosmo Lady’s shareholding structure
Mr. Zheng Yaonan
(Chairman)
Mr. Zhang Shengfeng
(Executive Director)
100%
100%
Great Brilliant
100%
62.1%
Great Ray
1.97%
Mr. Lin Zonghong
(Executive Director)
100%
Forever Shine
Forever Flourish
14.5%
19.3%
Harmonious
Composition (1)
Capital Today
Investment
9.98%
63.19%
Mr. Cheng Zuming
(Executive Director)
100%
Mountain Dragon
4.1%
Cosmic Vanguard
Free float
3.54%
21.32%
Cosmo Lady China
(2298 HK)
(1) Mr. ZHENG Yaonan (“Mr. Zheng”), Mr. ZHANG Shengfeng (“Mr. Zhang”), Mr. LIN Zonghong (“Mr. Lin”), Mr. CHENG Zuming (“Mr. Cheng”), Great Brilliant, Forever
Flourish, Forever Shine and Mountain Dragon, acting in concert, together controlled 63.19% in the Company through Harmonious Composition. As such, each of them
was deemed to be interested in such 63.19% interest in the share capital of the Company.
SOURCE: CIMB RESEARCH, COMPANY
OUTLOOK
Defensive product, high growth potential
Cosmo Lady is well positioned to benefit from the rapid growth in spending on
intimate wear in China. Clothing and, more specifically underwear, is expected
to be one of the beneficiaries of the growing wealth in China, with urban
household income expected to rise at a CAGR of 9.2% between 2014 and 2019.
5
Cosmo Lady│Hong Kong
March 25, 2015
Figure 5: China's per capital disposable income of urban households
Rmb '000
50
45
40
35
30
25
20
15
10
2019E
2018E
2017E
2016E
2014
2013
2012
2011
2010
0
2015E
5
SOURCES: NBS, Frost & Sullivan
The growth in the overall retail sales of clothing products is expected to
accelerate in the next five years, at a CAGR of 12.7% with the per capita spend
growing from Rmb1,022 in 2014 to Rmb1,854 by 2019.
Figure 6: China's per capita retail sales of clothing products
Rmb
2000
1800
1600
1400
1200
1000
800
600
400
2019E
2018E
2017E
2016E
2014
2013
2012
2011
2010
0
2015E
200
SOURCES: NBS, Frost & Sullivan
More specifically, the underwear industry is set to be a major beneficiary of this
increasing clothing spend due to 1) it being an essential product benefiting from
trade-up as consumers’ spending power increases and 2) the current low
spending per capita in China relative to other major nations. In 2014, China’s
per capita spending on underwear was US$26.4, roughly one-third of the
spending of major developed nations (as seen in the chart below developed
market spending per capita ranged from US$74-88).
6
Cosmo Lady│Hong Kong
March 25, 2015
Figure 7: Large population and consumer base in China (2014)
Figure 8: Per capita consumption of underwear 2014 (US$)
m
1,600
100
1393.8
87.5
90
1,400
Title:
Source:
84.6
80
74.4
74.3
74.1
France
Germany
US
1,200
70
1,000
60
800
50
40
600
30
26.4
322.6
400
20
127.0
200
82.7
64.6
63.5
Germany
France
UK
10
0
0
China
US
Japan
China
UK
Japan
Population (m)
SOURCES: CIMB, UNITED NATIONS
SOURCES: CIMB, FROST & SULLIVAN
In 2014, China’s per capita spending on underwear jumped by 15% yoy, from
US$23 to US$26.4, compared to overall retail sales growth in China for the first
two months of 2015 of 10.7%. According to Frost & Sullivan, China’s intimate
wear industry is set to grow at a CAGR of 17.7% between 2014 and 2019, while
the rate of growth in more developed markets is forecast to be significantly
slower at 1.1-3.5%.
Figure 9: China’s underwear market growing more rapidly (2014-2019E)
%
20
18
17.7
16
14
12
10
8
6
3.5
4
2.7
3.2
2
1.3
1.1
France
Germany
0
China
US
Japan
UK
SOURCES: CIMB, FROST & SULLIVAN
7
Cosmo Lady│Hong Kong
March 25, 2015
Figure 10: China's underwear market growth set to accelerate
Rmb bn
600
500
400
300
200
100
0
2010
2011
2012
2013
2014
2015E
2016E
2017E
2018E
2019E
SOURCES: CIMB, FROST & SULLIVAN
Cosmo Lady’s position in the mass market gives the company the ability to
differentiate itself from the competition through its successful branding and
product development, while at the same time being retailed at a price point that
is less likely to be impacted by overall economic conditions. Generally Cosmo
Lady’s products retail in the Rmb50-150 range, although its higher-end product
range (Secret of City Beauty brand) can be priced above Rmb300 per item.
The low-end underwear market (under Rmb50) is predominantly made up of
products where the brand is not a concern for the consumer who may typically
purchase in convenient stores or super markets. This low-end market has
shrunk from 24.3% to 17.8% of the overall China underwear market from 2009
to 2014, as consumers become more brand aware.
While the low-end has grown at a CAGR of 7.5% over the past five years, the
high-end (over Rmb300m) has also been impacted by the growth in the mass
market with high-end retail sales achieving a 5-year CAGR of 9.8%. This
compares to an overall market growth rate of 14.3%, with the mass market
growing at 20.8%.
Figure 11: Mass market underwear growing at fastest rate
100%
90%
80%
24.0%
28.5%
35.0%
70%
60%
50%
40.8%
53.7%
62.2%
17.8%
13.8%
2014
2019E
40%
30%
20%
10%
24.3%
0%
2009
Low-end market
Mass market
High-end market
SOURCES: CIMB, FROST & SULLIVAN
Looking out into the next five years, the trend is expected to continue, with the
mass market rising from 53.7% in 2014 to 62.2% in 2019. This will result in the
mass market segment rising from Rmb119.1bn in 2014 to Rmb311.4bn by 2019
or a CAGR of 21.2% against the overall industry CAGR of 17.7%.
8
Cosmo Lady│Hong Kong
March 25, 2015
Rapidly growing network
In order to capture the growth in China’s underwear market, Cosmo Lady is
rapidly expanding the number of stores to penetrate new cities and further
enhance its market share. The majority of Cosmo Lady’s stores are operated by
franchisees, making it easy for Cosmo Lady to expand its network without the
need for significant capital investment.
Franchisees will typically operate a small number of stores within a close
proximity to each other (other franchisees must be at least 2km away). The cost
of setting up a franchised store is paid for by the franchisee, who is also
required to pay a one-off franchise fee (approximately Rmb13,800 per
franchise store) as well as a one-off software fee (Rmb10,000) to be linked up
with Cosmo Lady’s POS-based inventory management system. The franchisee
will send the floor plan to Cosmo Lady who will order the fittings and then sell
back to the franchisee. In addition to the abovementioned fees, Cosmo Lady
generates revenue from the sale of its products to the store (initial payment by
the store will also cover initial inventory to be sold in the store). Total
franchised stores reached 6,049 by end-2014, up from 3,412 in 2011 (a CAGR of
21%).
One of the key uses of Cosmo Lady’s IPO proceeds is the expansion of its
self-managed outlet network. The stores operated by Cosmo Lady are typically
double the size compared to the franchised stores. The self-operated stores not
only give the company first hand market data, but also can generate double the
income of a franchised store (although the investment requirement is higher).
In 2011, Cosmo Lady only operated 82 stores. By the end of 2014, this figure
had reached 977, representing 14% of total stores. The company is looking to
achieve a balanced portfolio of store types with a target of 20% self-managed
and 80% franchised. In our model we assume that the company will add 800
franchised stores and 400 new self-managed stores each year for the next three
years. This will result in management’s target store split being met by 2017.
Figure 12: Cosmo Lady's total outlets by type
Figure 13: Moving towards target of 20% self-operated stores
no. of outlets
12,000
100%
2,177
10,000
1,777
1,377
50%
5,069
16.7%
18.9%
20.5%
Please fill in the values above to have them entered in your report
97.7%
95.5%
40%
82
4,429
13.9%
60%
721
209
2,000
Title:
Source:
12.5%
70%
977
4,000
4.5%
80%
8,000
6,000
2.3%
90%
6,049
6,849
7,649
87.5%
86.1%
83.3%
81.1%
79.5%
2013
2014
2015E
2016E
2017E
8,449
30%
20%
3,412
10%
-
0%
2011
2012
2013
Franchise store
2014
2015E
2016E
2017E
2011
Self-operated store
2012
Franchise store
SOURCES: CIMB, COMPANY REPORTS
Self-operated store
SOURCES: CIMB, COMPANY REPORTS
Having been founded in Guangdong, Cosmo Lady’s early expansion was
focused on Southern China. However, it has successfully expanded nationwide,
more recently increasing its penetration in Northern China where total sales
rose by 94.7% yoy in 2014 to Rmb654m (jumping from 11.5% of 2013 sales to
16.3% in 2014).
9
Cosmo Lady│Hong Kong
March 25, 2015
Figure 14: Cosmo Lady's geographical sales breakdown (2014)
16.3%
44.9%
18.7%
20.1%
S China
E China
SW China
N China
SOURCES: CIMB, COMPANY REPORTS
Figure 15: Northern China expansion accelerating
2,000
1,800
1,600
1,400
1,200
1,000
800
600
400
200
S China
E China
SW China
2013
N China
2014
SOURCES: CIMB, COMPANY REPORTS
Although Cosmo Lady does not provide a breakdown of its revenue by city type,
the company is expecting to derive a significant proportion of its growth from
tier 3 and tier 4 cities in China. According to industry forecasts, both tier 2 and
smaller cities are forecast to capture a larger segment of the market away from
tier 1 by 2019.
Figure 16: Tier 3-4 cities seeing fastest growth
100%
90%
80%
36.0%
36.4%
36.9%
25.2%
27.0%
27.5%
38.9%
36.6%
35.6%
2009
2014
2019E
70%
60%
50%
40%
30%
20%
10%
0%
Tier 1 cities
Tier 2 cities
Other cities
SOURCES: CIMB, FROST & SULLIVAN
10
Cosmo Lady│Hong Kong
March 25, 2015
Cosmo Lady has a VIP member scheme that provides members with discounts
of up to 20% as well as promotions. This member scheme provides the same
discount for both in-store and via Cosmo Lady’s e-commerce site. E-commerce
is expected to become a meaningful contributor to the group sales going
forward, in addition to the growth in physical stores. Underwear is a relatively
easy product to sell online as a loyal customer will know their preferred style
and size/fit and be able to reorder online.
Figure 17: My VIP card, status achieved by any purchase of over Rmb50
SOURCE: CIMB RESEARCH, COMPANY
Cosmo Lady launched its own e-commerce platform in Feb 2014; it has its own
site as well as operating platforms through multiple platforms including
Tmall.com, VIP.com, Jumei.com and JD.com. The e-commerce platform is
configured in a way that will see franchisees also benefit from the growing trend
in online sales. Franchisees will pay a fee to join the e-commerce system, and
will benefit from a profit-sharing mechanism whereby sales from a registered
account opened in its bricks and mortar store will entitle them to a share in the
online revenue. Cosmo Lady adopts a uniform pricing system across both its
online platform and offline outlets.
Figure 18: Cosmo Lady’s own e-commerce store
Figure 19: e-Store at Tmall.com
SOURCE: CIMB RESEARCH, COMPANY
SOURCE: CIMB RESEARCH, COMPANY
11
Cosmo Lady│Hong Kong
March 25, 2015
Figure 20: e-Store at VIP.com
Figure 21: e-Store at JD.com
SOURCE: CIMB RESEARCH, COMPANY
SOURCE: CIMB RESEARCH, COMPANY
Figure 22: E-commerce to grow to 7% of underwear sales by 2019
100%
1.1%
2.9%
7.0%
90%
80%
70%
50.1%
52.1%
55.4%
60%
50%
40%
30%
48.9%
45.0%
20%
37.6%
10%
0%
2009
2014
Supermarket & malls
Stand-alone outlets
2019E
E-commerce
SOURCES: CIMB, FROST & SULLIVAN
Enhancing product portfolio
Cosmo Lady initially started out as a one-brand company using the “Cosmo
Lady” brand. Over time, as the company has built up its brand reputation and
store network, the company has successfully developed another three women’s
brands specifically targeted at different age groups and price points to address a
wider potential customer base.
In 2012, Cosmo branched out into men’s underwear for the first time under the
Cosmo Esquire brand. Using Huang Xiao-ming as the face of Cosmo Esquire,
the brand has seen tremendous growth to become one of the largest men’s
underwear brands in China. In 2014, Cosmo Esquire sales rose 59.8% to
Rmb496.8m, equivalent to 12.4% of group sales (compared to 10.7% a year
earlier).
12
Cosmo Lady│Hong Kong
March 25, 2015
Figure 23: Cosmo Lady’s 2014 sales by brand
1,800.0
1,600.0
1,400.0
1,200.0
1,000.0
800.0
600.0
400.0
200.0
Cosmo Lady
Cosmo Elegance
Cosmo Blossom
2013
Cosmo Esquire
Others
2014
SOURCES: CIMB, COMPANY REPORTS
The diagram below summarises the different brands offered by Cosmo Lady,
and includes the recent acquisition of Ordifen (which itself has four in-house
brands).
Figure 24: Cosmo Lady’s product portfolio
Main brands of Cosmo Lady
Female products
Cosmo Lady
Cosmo Elegance
Cosmo Blossom
Secret of City
Beauty
Freeday
Newly acquired
in Mar-15
Male products
Ordifen
Cosmo Esquire
European style
brand
RUBii
Targets fashion Targets affluent
conscious women
women
consumers
consumers
Targets young
women
consumers
Targets urban
Newly launched
white-collar wellKorean-style
off women
brand
consumers
Colorful
collections for
young women
consumers
Targets young
and mature
male
consumers
IIsèe
Ordifen Men
French-style
jewellery brand
SOURCE: CIMB RESEARCH, COMPANY
13
Cosmo Lady│Hong Kong
March 25, 2015
Additional M&A opportunity
In early Mar 2015, Cosmo Lady announced the acquisition of China’s 5th largest
bra company and 7th largest underpants company, Shanghai Ordifen. The brand
entered China in 1993 and is well-established with 614 retail outlets as at
end-2014. Ordifen is positioned at a higher price point than Cosmo Lady with
bras retailing in the Rmb200-500 range (before discounting), compared to
Cosmo Lady’s Rmb50-300. Its outlets are mostly located in department stores
and shopping malls, in tier 1 and tier 2 cities; this adds a new dimension to
Cosmo Lady’s product offering and distribution platform as its own stores
consist of a higher proportion of standalone stores.
Figure 25: Franchised stores including Ordifen
Figure 26: Self-operated stores including Ordifen
No. of outlets
No. of outlets
7,000
Title:
Source:
1,400
364
6,000
1,200
250
5,000
1,000
4,000
800
6,049
3,000
6,049
600
5,069
4,429
2,000
400
3,412
1,000
977
977
2014
Pro-forma 2014
721
200
209
-
2011
2012
2013
2014
Number of franchised outlets
Pro-forma 2014
82
2011
Ordifen
2012
2013
Number of self-managed outlets
SOURCES: CIMB, COMPANY REPORTS
Ordifen
SOURCES: CIMB, COMPANY REPORTS
The acquisition price was Rmb92m (vs. net book value of Rmb 71.2m), which
represents a historical price-to-sales ratio of less than 0.3x; this compares to
Cosmo Lady’s own price-to-sales ratio of over 2x based on its 2014 revenue of
Rmb4.0bn. Ordifen has been impacted by its own problems with distribution
and logistics and despite achieving Rmb329.3m in sales in 2014, it record a net
loss (including extraordinary items which were not disclosed) of Rmb14.6m.
This was an improvement from the Rmb27.6m loss in 2013. We expect that by
integrating with Cosmo Lady’s highly efficient logistics and inventory
management infrastructure, the Ordifen business will be able to turn around
and contribute to Cosmo Lady’s bottomline quickly. As financial details are
limited at the moment, contributions from Ordifen are not in our earnings
forecasts.
We believe that given Cosmo Lady’s position as the market leader with a strong
cash position and positive cashflow generation, the company is best positioned
to become a potential consolidator for the industry. We expect that should a
target with the product portfolio and retail network to enhance Cosmo Lady’s
offering become available for a reasonable price, the company could make
further purchases to enhance its market share. Combined with organic growth,
we believe that Cosmo Lady could enhance its current 2.9% market share of
China’s underwear market to 5-10% over the next five years.
14
Cosmo Lady│Hong Kong
March 25, 2015
Figure 27: SWOT analysis
Strengths
Opportunities
- Largest brand in terms of retail sales and number of
outlets
- Strong inventory management system supported by
warehousing management and ERP software
- Recently acquired Ordifen, further potential M&A
opportunities
- E-commerce platform integrating both online and offline
sales channels
Weaknesses
Threats
- Overall market is fragmented and highly competitive, no
player has more than 3% market share
- Dependence on franchise store network, brand
reputational risk
- Fast store expansion may put pressure on SSSG
- Cash conversion cycle might lengthen as the portion
of self-managed stores increase
SOURCE: CIMB RESEARCH, COMPANY
RISKS
Inventory control
Cosmo Lady is expanding its store network aggressively and inventory control
management is crucial. The company mitigates this risk by linking all stores
through its central inventory software system. Franchised stores are permitted
to order up to twice a week, but will only be processed if the current store
inventory justifies the shipment.
Brand reputation
As over 80% of the stores are franchised and with Cosmo Lady’s key strength
being its strong brand in the mass market underwear industry in China, any
mismanagement by the franchisees could have a negative impact on the
company’s brand reputation.
Seasonal impact
Thermal clothes account for 13% of overall revenue for Cosmo Lady. The winter
of 2014/15 has been relatively mild in Southern China and this has slightly
reduced the revenue contribution from thermal clothes.
Dependence on OEM suppliers
Almost 100% of Cosmo Lady’s products are produced by OEM suppliers. In
order to control production, the company does extensive in-house testing of
materials to protect the brand image (suppliers are only allowed to use
materials from the approved material list). Cosmo Lady uses medium-sized
suppliers (majority produced by 50-60 suppliers) who derive the majority of
their income from Cosmo Lady, which gives the company good bargaining
power.
FINANCIALS
Revenue is set to grow at 28% CAGR in 2014-17
We forecast Cosmo Lady’s revenue to grow at 36%/26%/23% yoy in 2015/16/17
on the back of an aggressive outlet expansion plan in the coming years. With
expanding footprint in the 2nd and 3rd tier cities in China, we foresee Cosmo
Lady to have an additional 1,200 outlets each year in 2015-17. The total number
of outlets is expected to reach 10,626 in 2017, with 8,449 franchised stores and
2,177 self-managed stores.
15
Cosmo Lady│Hong Kong
March 25, 2015
Figure 28: Revenue growth outlook
Rmb m
9,000
40%
37%
36%
8,000
35%
7,000
6,000
29%
30%
5,000
26%
4,000
23%
3,000
2,000
25%
20%
1,000
-
15%
2013
Total revenue
2014
Sales to franchisees
2015E
2016E
Retail sales
2017E
Total revenue YoY% (RHS)
SOURCES: CIMB, COMPANY REPORTS
Margin is trending up due to rising contribution from
higher-margin self-managed stores
Gross profit margin in 2014 increased by 2.5% pts to 39.2%. We expect the
rising trend to continue in the coming years as the higher-margin (c. 60% GPM
vs c. 30% GPM in franchised stores) self-managed stores’ contribution
continues to rise. With an additional 400 self-managed stores a year in 2015-17,
we forecast the self-managed stores to account for 20.5% of the total number of
outlets in 2017, from only 13.9% in 2014.
Selling and distribution expenses are expected to increase
With the increasing number of self-managed stores, we expect the selling and
distribution expenses to increase by 41%/29%/25% yoy in 2015/16/17. Unlike
the franchised stores, Cosmo Lady has to bear all the SG&A costs for
self-managed stores including rental, marketing and admin expenses.
Capex will slightly increase to Rmb200m a year for its
expansion in logistics capacity
We forecast Cosmo Lady’s capex to increase by 52.9% yoy to Rmb200m in 2015
as Cosmo Lady is currently building one more logistics facility in Dongguan.
The new facility is expected to commence in 2H15 which will further strengthen
the company’s logistic capability.
Strong balance sheet, cash flows and working capital
Cosmo Lady has Rmb1.08bn cash on hand with no debt. As the business is
expected to generate strong operating cashflow, we do not foresee the need for
an significant borrowings in the near term. In terms of working capital, we
expect strong inventory management and expect the inventory days to remain
flat at 80 days in 2015-17 vs. 78 days in 2014. Inventory days jumped from 70
days in 2013 as a result of the fast growth rates from self-managed outlets.
While account receivable days and payable days are stable at 21 days and 37
days respectively, cash conversion cycle for Cosmo Lady remains healthy at 64
days.
16
Cosmo Lady│Hong Kong
March 25, 2015
Figure 29: Inventory days
Figure 30: Accounts receivable days
Days
Days
90
23
78
80
80
80
80
22
22
72
Please fill in the values above to have them entered in your report
70
60
Title:
Source:
22
59
21
50
21
21
21
21
2014
2015E
2016E
2017E
21
40
20
20
30
20
20
19
10
-
19
2012
2013
2014
2015E
2016E
2017E
2012
2013
SOURCES: CIMB, COMPANY REPORTS
Figure 31: Accounts payable days
SOURCES: CIMB, COMPANY REPORTS
Figure 32: Cash conversion cycle (days)
Days
Days
50
Title:
Source: 62
70
45
45
43
60
40
37
37
37
40
64
49
50
30
64
Please fill in the values above to have them entered in your report
37
35
64
36
25
30
20
15
20
10
10
5
-
2012
2013
2014
2015E
2016E
2017E
2012
SOURCES: CIMB, COMPANY REPORTS
17
2013
2014
2015E
2016E
2017E
SOURCES: CIMB, COMPANY REPORTS
Cosmo Lady│Hong Kong
March 25, 2015
VALUATION AND RECOMMENDATION
Strong earnings momentum to drive re-rating
Cosmo Lady has performed well in its first nine months since listing. The stock
enjoyed a strong run initially and has recently been trading in the HK$5-5.50
range. The company also announced its first annual results with a 37% increase
in revenue to Rmb4.0bn and a 54% rise in net profit to Rmb425m. We see a
high potential for the stock to further re-rate on the back of projected 32%
earnings CAGR over the next three years. Despite its US$1.3bn market cap, the
stock is not currently widely covered by the market and we believe that
additional coverage could further help raise the profile and drive a re-rating.
3.5
3.5
3
3
Cosmo Lady (2298 HK) (HK$/sh)
11x
13x
Feb-15
Oct-14
9x
15x
Cosmo Lady (2298 HK) (HK$/sh)
SOURCES: CIMB, BLOOMBERG
2x
2.5x
3x
Feb-15
4
Jan-15
4
Dec-14
4.5
Nov-14
4.5
Oct-14
5
Sep-14
5
Jun-14
5.5
Jan-15
5.5
Dec-14
6
Nov-14
6
Sep-14
6.5
Aug-14
6.5
Jul-14
7
Jun-14
7
Aug-14
Figure 34: Cosmo Lady – 12 month forward P/BV band (HK$)
Jul-14
Figure 33: Cosmo Lady – 12 month forward P/E band (HK$)
3.5x
SOURCES: CIMB, BLOOMBERG
It is difficult to compare Cosmo Lady with other Hong Kong listed underwear
companies. Embry (1388 HK) is the only branded company (Embry Form
brand) which commands less than a third of the China retail sales of Cosmo
Lady (in volume terms, Cosmo Lady outsells Embry by approximately 8x). For
Embry there are no consensus forecasts, and the company is seeing limited
growth after reporting 2014 revenue growth of just 6.6%, while net profit
declined by 5.2% to HK$188m or HK$0.45 per share (historical P/E of 8.6x).
Top Form (333 HK) is a supplier of bras and underwear to overseas brands
(52% to the US market, 28% to the EU) and has a market cap of just over
US$50m. Best Pacific (2111 HK) is another small-cap that provides lingerie
materials to leading brands including Aimer, Embry Form, Triumph, Wacoal
and Victoria’s Secret, but does not manufacture final products or has a retail
network/consumer brand (the stock is trading at 10.3x consensus FY15 P/E).
International underwear companies trade at an average FY15 P/E of 31.2x. The
majority are brand owners who outsource production to third parties. L Brands
(LB US) is the owner of ‘Victoria’s Secret’, ‘Pink’ and ‘La Senza’, Pacific Brands
(PBG AU) sells ‘Bonds’ and ‘Berlei’ brands and Hanesbrands (HBI US) owns
brands including ‘Hanes’, ‘Playtex’, ‘wonderbra’ and ‘barely there’. Page
Industries (PAG IN) is the largest underwear company in India with a
spectacular historical growth trajectory as it has benefitted from its exclusive
right to the Jockey brand in India, Sri Lanka, Bangladesh, Nepal and the UAE.
Wacoal (3591 JP) is a leading Japanese ladies’ underwear brand. The only
company delivering close to the growth of Cosmo Lady is Page Industries,
which is trading at consensus FY15 P/E of almost 75x.
18
Cosmo Lady│Hong Kong
March 25, 2015
Figure 35: Sector Comparisons
Bloom berg
Com pany
Ticker
Price
Recom .
Target
Price
(local curr) (local curr)
Market
Cap
Core P/E (x)
(US$ bn) CY2015 CY2016
3-year
P/BV (x)
EPS
CAGR
CY2016 CY2015 CY2016
Recurring ROE
(%)
EV/EBITDA (x)
CY2015 CY2016 CY2015 CY2016
Dividend Yield (%)
CY2015 CY2016
Underw ear
Hong Kong
Cosmo Lady
2298 HK
ADD
5.27
6.82
1,295.7
13.3
10.3
31.4%
3.0
2.5
24.7%
26.7%
7.9
5.7
1.9%
Embry
1388 HK
NOT RATED
3.84
N/A
206.3
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Best Pacific
2111 HK
NOT RATED
3.49
N/A
458.5
10.3
8.3
26.5%
1.9
1.6
19.9%
20.9%
6.8
5.8
2.7%
3.4%
Top Form
333 HK
NOT RATED
1.90
N/A
52.7
Average
2.3%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
11.8
9.3
28.9%
2.5
2.1
22.3%
23.8%
7.3
5.7
2.3%
2.8%
International
L Brands
LB US
NOT RATED
94.09
N/A
27,511.3
25.5
23.4
8.9%
199.5
41.4
539.0%
269.9%
12.2
11.3
4.2%
2.3%
Page Industries
PAG IN
NOT RATED
13,751.00
N/A
2,458.6
74.7
57.1
32.1%
38.9
29.2
58.2%
55.9%
47.5
36.7
0.7%
0.9%
Wacoal
3591 JP
NOT RATED
1,458.00
N/A
1,747.3
22.0
20.4
16.4%
1.0
0.9
4.3%
4.6%
11.6
10.5
2.0%
2.1%
Pacific Brands
PBG AU
NOT RATED
0.48
N/A
346.3
12.0
11.0
-20.4%
1.1
1.0
8.5%
9.0%
6.2
5.9
4.5%
5.4%
Hanesbrands
HBI US
NOT RATED
34.13
N/A
13,679.5
21.8
19.3
24.0%
8.3
4.7
43.2%
42.3%
15.9
14.8
1.5%
1.6%
31.2
26.2
12.2%
49.7
15.5
130.7%
76.3%
18.7
15.9
2.6%
2.5%
Average
Apparel
Anta Sports
2020 HK
NOT RATED
16.12
N/A
5,190.8
16.4
14.4
19.9%
3.8
3.4
24.1%
25.2%
10.7
9.4
4.3%
4.9%
Xtep
1368 HK
NOT RATED
2.25
N/A
632.0
6.9
6.5
4.0%
0.8
0.8
11.8%
12.0%
2.2
2.1
8.0%
8.8%
Yue Yuen Ind
551 HK
NOT RATED
27.85
N/A
5,922.1
11.9
10.3
10.3%
1.3
1.2
10.9%
11.8%
8.2
7.3
4.4%
4.8%
Li Ning
2331 HK
NOT RATED
4.42
N/A
1,074.6
168.7
21.9
N/A
2.2
2.0
2.7%
10.9%
16.8
9.2
0.1%
0.6%
Belle
1880 HK
NOT RATED
8.71
N/A
9,473.6
12.6
11.6
1.6%
2.0
1.9
16.8%
17.0%
7.3
6.7
4.9%
5.0%
Daphne
210 HK
NOT RATED
2.26
N/A
480.6
10.7
8.5
8.1%
0.7
0.7
7.1%
8.5%
4.9
4.1
3.3%
4.3%
China Lilang
1234 HK
NOT RATED
5.87
N/A
911.4
9.2
8.5
8.8%
2.0
1.8
21.2%
21.5%
6.0
5.5
7.0%
7.7%
Trinity
891 HK
NOT RATED
1.56
N/A
351.4
14.4
11.9
-9.2%
0.8
0.8
5.4%
6.4%
8.3
7.2
5.4%
6.7%
Heilan Home
600398 CH
NOT RATED
14.16
N/A
10,238.4
20.1
16.0
45.8%
5.8
5.2
36.9%
34.3%
13.2
10.5
2.4%
3.2%
Kaiser
002425 CH
NOT RATED
15.8
N/A
988.5
143.2
143.2
37.4%
4.0
3.9
2.7%
2.8%
N/A
N/A
N/A
N/A
41.4
25.3
14.1%
2.3
2.2
14.0%
15.1%
8.6
6.9
4.4%
5.1%
Average
SOURCES: CIMB, BLOOMBERG
We believe with no direct listed comparable and the strong cashflow generation of
Cosmo Lady’s business model, a DCF valuation is an appropriate way to value the stock,
especially as it captures the strong free cashflow generation of the business. For our DCF
valuation, we used a WACC of 9.3%, with a terminal growth rate of 3% beyond 2025.
This gives a per share equity value of HK$6.82 (using an Rmb:HK$ exchange rate of
1.25).
19
Cosmo Lady│Hong Kong
March 25, 2015
Figure 36: Discounted cash flow (DCF) valuation
Revenue
Cost of sales
Gross profit
Other income
Selling and distribution expenses
Administrative and Other Expenses
DD&A
Operating profit
Tax rate
EBIT (1-t)
Add back: DD&A
Capex
Working capital
FCF
Terminal value
Total FCF
Valuation
Total present value of FCF
Terminal growth
(Net cash)/net debt
Minority interest
Net Firm Value
NOSH
Equity value per share
Rmb m
Rmb m
Rmb m
Rmb m
Rmb m
Rmb m
Rmb m
Rmb m
%
Rmb m
Rmb m
Rmb m
Rmb m
Rmb m
2014
4,008
(2,440)
1,568
79
(852)
(186)
(38)
571
-28%
413
38
(131)
(668)
(348)
Rmb m
(348)
Rmb m
%
Rmb m
Rmb m
Rmb m
m shares
HKD/sh
11,479
3%
(1,081)
0
10,398
1,906
6.82
2015E
5,442
(3,249)
2,193
67
(1,136)
(252)
(61)
810
-28%
587
61
(200)
(187)
261
261
2016E
6,878
(4,031)
2,848
67
(1,468)
(319)
(80)
1,048
-28%
759
80
(200)
36
675
675
2017E
8,445
(4,882)
3,562
67
(1,843)
(391)
(99)
1,296
-28%
938
99
(200)
(313)
524
2018E
2019E
2020E
2021E
2022E
2023E
2024E
577
634
698
767
821
879
940
577
634
698
767
821
879
940
524
Assumptions
Medium term growth (2018-2021)
Long term growth (2021-2025)
Terminal growth rate
WACC calculation
Risk-free Rate of Return
Equity Risk Premium
Company Beta
Cost of Equity
1,006
16,325
17,331
10.0%
7.0%
3.0%
3.0%
6.5%
1.0
9.5%
Pre-tax Cost of Debt
Tax Rate
After-tax Cost of Debt
11.0%
27.6%
8.0%
Debt/Capital
Equity/Capital
10.0%
90.0%
WACC
2025E
9.3%
SOURCES: CIMB
NOTES FROM THE FIELD
Site visit highlights
We recently visited Cosmo Lady’s headquarters in Dongguan. In addition to the
management and support functions, the main facility was the logistics hub for
the whole Cosmo Lady network. On site there were training facilities for both
franchisees and self-managed store staff. We also spent time in the material
testing department, where samples of materials are put through rigorous
testing to ensure materials being used by its suppliers meet the requirements.
We also visited two shops, one in Dongguan Fenggang (franchisee shop) and
one in Shenzhen Dongmen (self-operated shop):
Dongguan Fenggang shop (franchise)
 Revenue per month: c.Rmb200,000
 The inventory purchased from Cosmo Lady is roughly half of the selling
price, implying a gross margin of c.50%
 Monthly rent of the store (approximately 30-40sqm) is
Rmb4,000-5,000/month
 The shop was started in 2012. The sales trend in 2012-2014 was good.
However, sales in Dec 14 and Jan 15 were roughly flat due to the warm
winter which lowered demand for higher ticket thermal clothes.
Shenzhen shop (self-operated)
 Revenue per month: c.Rmb1m
 Sales growth in 2014 was ~20%. Sales growth in early 2015 was also over
20% yoy.
20
Cosmo Lady│Hong Kong
March 25, 2015
 Monthly rent of the store (c. 100sqm) is Rmb150,000. There is no rental
pressure as it is large commercial brand (more bargaining power) and the
contract is for five years.
 The store is seeing increasing ASP due to the product mix. Average price in
2014 was Rmb90/unit vs. Rmb110/unit in early 2015.
Figure 37: Logistics line sorting products to ship to stores
Figure 38: Products in warehouse ready for sorting
SOURCE: CIMB RESEARCH, COMPANY
SOURCE: CIMB RESEARCH, COMPANY
Figure 39: Materials tested for durability
Figure 40: Dyes tested for reactions
SOURCE: CIMB RESEARCH, COMPANY
SOURCE: CIMB RESEARCH, COMPANY
21
Cosmo Lady│Hong Kong
March 25, 2015
Figure 42: Inside the store carrying all Cosmo Lady’s brands
Figure 41: Self-operated store in Shenzhen
SOURCE: CIMB RESEARCH, COMPANY
SOURCE: CIMB RESEARCH, COMPANY
Figure 43: Training store at headquarters
Figure 44: Surveillance of self-operated stores at HQ
SOURCE: CIMB RESEARCH, COMPANY
SOURCE: CIMB RESEARCH, COMPANY
Management profiles
Mr. ZHENG Yaonan (鄭耀南), aged 39, is one of the founders of Cosmo Lady
and was appointed as Chairman, Executive Director and Chief Executive Officer
in Jan 2014. Mr. Zheng started the intimate wear sales business as early as in
1998 and served as the chairman and the president at Shenzhen City Beauty
Fashion Co., Ltd., an intimate wear company, from Mar 2006 to Aug 2009. Mr.
Zheng co-founded Cosmo Lady Guangdong, in Sep 2009, where he had served
as the chairman and the president since then until Jul 2013, and has thereafter
held the positions of executive director and chief executive officer. Mr. Zheng
has approximately 15 years of experience in the intimate wear manufacturing
and sales industry. He is primarily responsible for the strategic planning,
business development, corporate management and overall performance of
Cosmo Lady.
Mr. ZHANG Shengfeng (張盛鋒), aged 45, was appointed as Executive Director,
Deputy Chairman of the Board and Vice President in Jan 2014. Mr. Zhang was
a co-founder of Cosmo Lady Guangdong where he had served as a deputy
chairman since then until Jul 2013, and has thereafter held the positions of
executive director and vice president. Previously, Mr. Zhang served as a
director at Shenzhen City Beauty Fashion Co., Ltd., an intimate wear company,
22
Cosmo Lady│Hong Kong
March 25, 2015
from Mar 2006 to Aug 2009. Mr. Zhang is primarily responsible for the design,
research and development and procurement for Cosmo Lady.
Mr. LIN Zonghong (林宗宏), aged 45, was appointed as Executive Director,
Deputy Chairman of the Board and Vice President in Jan 2014. Mr. Lin was a
co-founder of Cosmo Lady Guangdong, established in Sep 2009, where he had
served as a deputy chairman since then until Jul 2013, and has thereafter held
the positions of executive director and vice president. Prior to that, Mr. Lin
served as a director at Shenzhen City Beauty Fashion Co., Ltd., an intimate
wear company. Mr. Lin is primarily responsible for the production and logistics
for Cosmo Lady.
Mr. CHENG Zuming (程祖明), aged 37, was appointed as Executive Director,
Vice President and Chief Operating Officer in Jan 2014. Mr. Cheng was a
co-founder of Cosmo Lady Guangdong, established in Sep 2009, where he had
served as a director since then until Jul 2013, and has thereafter held the
positions of executive director, vice president and chief operating officer. Prior
to that, Mr. Cheng worked at an intimate wear chain store from Jan 2003 to
Feb 2005. From Mar 2005 to Sep 2009, he held the position of vice president
in Shenzhen City Beauty Fashion Co., Ltd., an intimate wear company. Mr.
Cheng is primarily responsible for the sales, marketing and customer relations
for Cosmo Lady.
23
Cosmo Lady│Hong Kong
March 25, 2015
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Cosmo Lady│Hong Kong
March 25, 2015
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25
Cosmo Lady│Hong Kong
March 25, 2015
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26
Cosmo Lady│Hong Kong
March 25, 2015
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Distribution of stock ratings and investment banking clients for quarter ended on 31 December 2014
1586 companies under coverage for quarter ended on 31 December 2014
Rating Distribution (%)
Investment Banking clients (%)
Add
58.4%
6.0%
Hold
29.4%
4.3%
Reduce
12.2%
1.0%
Spitzer Chart for stock being researched ( 2 year data )
27
Cosmo Lady│Hong Kong
March 25, 2015
Cosmo Lady (2298 HK)
Price Close
6.00
5.50
5.00
4.50
4.00
3.50
3.00
Jun-14
Aug-14
Sep-14
Nov-14
Jan-15
Feb-15
Corporate Governance Report of Thai Listed Companies (CGR). CG Rating by the Thai Institute of Directors Association (Thai IOD) in 2014.
AAV – Very Good, ADVANC – Very Good, AEONTS – not available, AMATA - Good, ANAN – Very Good, AOT – Very Good, AP - Good, ASK – Very Good,
ASP – Very Good, BANPU – Very Good , BAY – Very Good , BBL – Very Good, BCH – not available, BCP - Excellent, BEAUTY – Good, BEC - Good, BECL –
Very Good, BGH - not available, BH - Good, BIGC - Very Good, BJC – Good, BLA – Very Good, BMCL - Very Good, BTS - Excellent, CCET – Good,
CENTEL – Very Good, CHG – not available, CK – Very Good, CPALL – not available, CPF – Very Good, CPN - Excellent, DELTA - Very Good, DEMCO – Good,
DTAC – Very Good, EA - Good, ECL – not available, EGCO - Excellent, GFPT - Very Good, GLOBAL - Good, GLOW - Good, GRAMMY - Excellent, HANA Excellent, HEMRAJ – Very Good, HMPRO - Very Good, ICHI - not available, INTUCH - Excellent, ITD – Good, IVL - Excellent, JAS – not available, JUBILE –
not available, KAMART – not available, KBANK - Excellent, KCE - Very Good, KGI – Good, KKP – Excellent, KTB - Excellent, KTC – Good, LH - Very Good,
LPN – Very Good, M - not available, MAJOR - Good, MAKRO – Good, MBKET – Good, MC – Very Good, MCOT – Very Good, MEGA – Good, MINT Excellent, OFM – Very Good, OISHI – Good, PS – Very Good, PSL - Excellent, PTT - Excellent, PTTEP - Excellent, PTTGC - Excellent, QH – Very Good,
RATCH – Very Good, ROBINS – Very Good, RS – Very Good, SAMART - Excellent, SAPPE - not available, SAT – Excellent, SAWAD – not available, SC –
Excellent, SCB - Excellent, SCBLIF – Good, SCC – Very Good, SCCC - Good, SIM - Excellent, SIRI - Good, SPALI - Excellent, STA – Very Good, STEC - Good,
SVI – Very Good, TASCO – Good, TCAP – Very Good, THAI – Very Good, THANI – Very Good, THCOM – Very Good, THRE – not available, THREL – Good,
TICON – Good, TISCO - Excellent, TK – Very Good, TMB - Excellent, TOP - Excellent, TRUE – Very Good, TTW – Very Good, TUF - Good, VGI – Very Good,
WORK – not available.
CIMB Recommendation Framework
Stock Ratings
Definition:
Add
The stock’s total return is expected to exceed 10% over the next 12 months.
Hold
The stock’s total return is expected to be between 0% and positive 10% over the next 12 months.
Reduce
The stock’s total return is expected to fall below 0% or more over the next 12 months.
The total expected return of a stock is defined as the sum of the: (i) percentage difference between the target price and the current price and (ii) the forward
net dividend yields of the stock. Stock price targets have an investment horizon of 12 months.
Sector Ratings
Overweight
Neutral
Underweight
Definition:
An Overweight rating means stocks in the sector have, on a market cap-weighted basis, a positive absolute recommendation.
A Neutral rating means stocks in the sector have, on a market cap-weighted basis, a neutral absolute recommendation.
An Underweight rating means stocks in the sector have, on a market cap-weighted basis, a negative absolute recommendation.
Country Ratings
Overweight
Neutral
Underweight
Definition:
An Overweight rating means investors should be positioned with an above-market weight in this country relative to benchmark.
A Neutral rating means investors should be positioned with a neutral weight in this country relative to benchmark.
An Underweight rating means investors should be positioned with a below-market weight in this country relative to benchmark.
*Prior to December 2013 CIMB recommendation framework for stocks listed on the Singapore Stock Exchange, Bursa Malaysia, Stock Exchange of Thailand,
Jakarta Stock Exchange, Australian Securities Exchange, Taiwan Stock Exchange and National Stock Exchange of India/Bombay Stock Exchange were
based on a stock’s total return relative to the relevant benchmarks total return. Outperform: expected to exceed by 5% or more over the next 12 months.
Neutral: expected to be within +/-5% over the next 12 months. Underperform: expected to be below by 5% or more over the next 12 months. Trading Buy:
expected to exceed by 3% or more over the next 3 months. Trading Sell: expected to be below by 3% or more over the next 3 months. For stocks listed on
Korea Exchange, Hong Kong Stock Exchange and China listings on the Singapore Stock Exchange. Outperform: Expected positive total returns of 10% or
more over the next 12 months. Neutral: Expected total returns of between -10% and +10% over the next 12 months. Underperform: Expected negative total
returns of 10% or more over the next 12 months. Trading Buy: Expected positive total returns of 10% or more over the next 3 months. Trading Sell: Expected
negative total returns of 10% or more over the next 3 months.
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