Zhizhi Analysis | After privatizing Belle, Gaochun went out of the key step of making money back


When KKR acquired tobacco and food company RJR Nabisco, Brazil’s 3G capital merger and acquisition of beer company Budweiser InBev, these are examples of private equity funds or investment banks that are not satisfied with the financial industry itself.They acquired the company and intervened in the business, managing hundreds of billions of dollars in assets with an elite team of dozens of people to get the highest return.This can be said to be the highest-selling method of private equity funds, and of course the most difficult.In China, Gaochun Capital is trying this path.In 2017, Gaochun and Dinghui together privatized Belle International (1880.HK), the former shoe industry leader, Xishan Xishan, whose share price has been falling for several consecutive years.In October 2019, Gaochun split a portion of Belle’s business into a separate listing. The new company’s total market capitalization (6110.HK) reached HK$58.2 billion, higher than Belle’s privatization price of HK$53.1 billion.It can be said that the successful listing of Qibo has earned back the money of privatized Belle for Gaochun. The remaining business of Belle belongs to “white delivery”. The transaction has been returned to the sorghum, and the follow-up will see whether Gaochun can turn the madness of Belle.The women’s shoes business, this will be a key step for Gaochun to become China’s KKR and 3G capital.“Private Priest, then sell or split assets, and some assets will be listed first. This is a fairly complicated transaction.” A financial person close to the transaction said to 36 ,, “Of course this is the convention of international big PEs.The spin-off operation aims to make the value of different assets higher than the existing value after the spin-off. Although the sports shoes and apparel business contributed nearly half of Belle’s revenue, and the growth was good.However, due to the drag of the women’s shoes business, the overall valuation of the investors to Belle is low, which provides a profit margin for the spin-off.The sportswear business once contributed a 41% valuation to Belle; Image source: BOC International, what kind of company is Pace?Why is the sorghum able to return to the book after the spin-off?Let’s take a look at it: Sportswear is a high-growth category in the retail industry. First, Buddhism is a retailer that sells sports shoes and apparel to international brands such as Nike and Adidas. It has 8,343 straight in 268 cities.Camp store.This track of sports shoes has been in the inventory backlog since 2007 due to over-expansion, until it eased in 2014 and re-entered high growth so far.From 2014 to 2018, the average compound growth rate is 12%, which is much higher than the 5% of the overall footwear market.The high growth of shoes and clothing can also be seen in the leading companies Nike and Adidas, Nike stocks rose by 153% from 2014, Adidas rose by 200%.In this segment, Boao has the first domestic market share. In 2018, the retail sales reached 37.5 billion yuan, 30% higher than the second Baosheng International.At present, both the sports brand and the head agency retailer have screened out the head company and the concentration is relatively high.In terms of sports brands, Nike and Adidas have a leading position and firmly occupy the top two in the Chinese sportswear market.In 2018, Nike (including Air Jordan and Converse) achieved a domestic market share of 22.9%, and Adidas (including Reebok) was 19.7%.As with the trend of the brand itself, agency retailers are also showing a trend of higher concentration.Today, the top two retailers, Bobo and Baosheng International, account for 15.9% and 11.6% respectively, and the industry’s third place is only 1.4%.At the same time, Nike and Adidas are the main brands of the company. They contribute more than 87% of the company’s revenue every year in 2017-2019. The cooperation time between Nike and Nike is 20 years. Nike operates in 50% of stores in China. It is also Nike.The world’s second largest retailer partner.Similar to Adidas, the two companies have been working together for 15 years and are the world’s largest retail partner of Adidas.The performance of Nike and Adidas in China will directly affect the income of the fight.From 2018 to 2019, Nike and Adidas’ average revenue growth in Greater China was around 21%. The two main brands’ revenue growth was also at this level. The two main brands accounted for nearly 90% of revenue.%.According to the analysis of Guosheng Securities, the sports industry chain has formed an industry chain pattern of leading dialogues with each other: upstream Shenzhou International is the world’s largest sportswear manufacturer (accounting for nearly 20% of Nike orders), and the top four market share of midstream brands is nearly 70%.%, the two major professional sports retailers in the downstream account for about 25% of the Chinese market, and coexist with the closed distribution system of each brand.This feature makes the leading edge of each link significant, and the national large retailers have a clear advantage in channel layout, retail management and brand cooperation.China’s major sportswear retailers can be divided into three categories: brand-owned channels, national retailers and regional retailers.The brand’s self-operated channels are mainly concentrated in first- and second-tier cities. It is a large-scale flagship store and retail store, and an online flagship store on the main e-commerce platform.These brand direct channels often account for 10%-30% of international brands’ sales in China. The rest are developed by international brands and retailers to expand their business, such as 滔 或 or Bao Sheng International, etc.There are only three stores in the range, and the rest are more fragmented regional retailers.According to Sullivan’s report, these three channels accounted for 33.4%, 28.7% and 37.9% of China’s 225.7 billion sports shoes and apparel retail market in 2018, respectively.As far as the retail model is concerned, China is different from the international market. China is mainly a single-brand store, while multi-brand stores in Europe and America account for the majority.This is because Chinese consumers are still at the stage of more recognition of brands. Compared with multi-brand stores, single-brand stores can display brand image.The growth of hard work has also benefited from the growth of the international sports brand market share.According to Sullivan’s report, the market share of international sports brands in China has risen from 46% in 2014 to 54% in 2018. This trend has laid the foundation for a sustained growth.On the other hand, sports shoes and apparel still have good growth potential, because China’s per capita annual consumption expenditure in this area is still less than other developed economies.Compared with the world, in 2018, sports shoes and clothing accounted for 27.7% of the total per capita consumption of shoes and clothing, the United States was 31.8%, Japan was 24.3%, South Korea was 25.7%, Germany was 27.2%, China was only 12.5.%.Under such a background, the growth of all kinds of sports shoes and apparel companies is good, but because of the drag on Belle women’s shoes, Belle’s business in sports shoes and apparel has not obtained a high valuation. After the privatization and spin-off,On the contrary, it can have better performance.However, there is no risk in the fight. With the success of sub-brands such as lululemon, brand direct sales are increasingly valued.For example, lululemon’s direct stores + e-commerce flagship stores accounted for more than 90%, while the distribution-oriented Under Armour (An Dema) was deeply affected by the bankruptcy of core retailers, which seriously dragged down the performance.The brand direct mode is able to respond effectively to the needs of consumers because it can effectively control the terminal channels. It is increasingly favored by major brands, even if Nike, Adidas and other giants with distribution models dominate.The ratio is also gradually improving, which will be the core issue faced by dealers such as Qibo and Baosheng International.Sorghum buys Belle to buy very cheap sorghum privatized Belle wants to get excess returns, another big key is to buy cheap.When Belle International was privatized in 2017, the price was HK$53.1 billion. After the Belle sportswear and apparel business was unpacked, it was listed as a price of HK$52.7 billion in two years. This shows that Belle’s privatization value is low.If compared with the industry average, according to CCBI estimates, if the privatization price is HK$53.1 billion, the EV/EBITDA for FY2017 is 6.5 times, which is lower than the average of 7.7 times of China’s optional consumer industry. P/E (PE)It is 13 times, close to the industry average.If the valuation model given by JPMorgan, Belle’s forecast P/E ratio (PE) is only 8 times, it can be seen that the market is generally pessimistic.Therefore, at that time, the king of women’s shoes in the past has been thin, and the net profit of Belle has declined for two consecutive years. In 2016, it fell by 38% year-on-year, and in 2017 it fell by 18%.It was a vision and courage to make acquisition decisions at the time.Belle was in a period of rapid development before 2013, and its market value exceeded 150 billion in early 2013.However, in the second half of 2013, the whole industry ushered in a watershed. The market growth rate began to slow down and the competition became more intense. The problem of lack of flexibility and lack of innovative design of Belle brand began to be exposed, for example, the more popular brands Charles & Keith in recent years.In contrast, at the same price, Belle’s shoes are far behind in design, and consumers are hard to buy.After 2013, Belle fell into decline, and the market share fell all the way after the peak of 2013. Profits began to decline negatively since 2014.Especially under the impact of e-commerce, Belle, which has many physical assets, is worse.Belle also tried to enter the online line. In 2011, it established a vertical e-commerce platform, which mainly sells fashion accessories and shoes and bags of Belle. It also digs Xu Lei, the vice president of Jingdong (currently Jingdong Mall).CEO), and Mr. Zhang Xiaojun, vice president of Vanke Eslite, worked as CMO and COO.According to analysis of Huatai Securities, has developed well in the initial stage, but Belle’s overall strategic layout is still focused on offline. It is necessary to give priority to the interests of offline stores, and strictly distinguish between online and offline goods. Many seasonal new models are only available offline.The sale of the store has led to the purchase of the network as a platform for “tail processing” and “discount sales”.At the end of 2012, Xu Lei and Zhang Xiaojun left, and the vertical e-commerce model was no longer optimistic about the market. The same types of platforms, such as Letao, Haole, and Cool, all went to the end, and the U-Net was gradually disappearing. Belle’s e-commerceTry to end in failure.The decline in sales volume and profits led to the suspension of channel expansion and the opening of a large-scale store. In 2016, Belle closed 366 stores, and closed one on average one day. After that, it even turned off one day.The market value of Belle has also shrunk all the way, from a high of HK$18 per share in 2013 to HK$4, shrinking to nearly 80% until 2017, when Gaochun and Dinghui were privatized.However, Huatai Securities believes that for long-term strategic investors, Belle is in a decline period, but its stable cash flow, excellent supply chain management, huge offline network, and considerable user groups are still of sufficient value.According to an estimate by Gaochun Capital in 2016, Belle had more than 20,000 stores at that time, which can bring 6 million passengers per day. It can be regarded as 6 million daily active users, and the online traffic is increasingly expensive.More than 20,000 offline channels owned by Belle are becoming more and more precious. If these channels can be effectively transformed, the value they play will not be underestimated.At present, the shop is still relatively profitable.According to the prospectus, the new store will take three months to reach the break-even point and 16 months to reach the return on investment, which is a good level in the retail industry.滔 门 店 shop layout; image source: the most difficult step of the prospectus: the transformation of the value of the assets to improve how to transform Belle, the most talked about is the technology.How to do it in detail, you can know a little through the beat.In 2018, Bianbo installed a smart store system in one of the stores.During the observation period, through analysis of the data, the store manager found that female consumers accounted for 50% of the shoppers, but female consumers contributed only 33% of the store revenue.In addition, through the consumer in-store action data recorded by the system, the store manager found that 70% of consumers have never stepped into the shopping area at the back of the store.Based on these observations, the store manager added a female product SKU, rearranged the store layout to increase the visibility of the rear shopping area, and placed more display shelves between the front and back of the store to change the consumer flow.After one month of these changes, the monthly sales of female product SKUs increased by 40%, the monthly sales of the rear shopping district increased by 80%, the monthly sales of the whole store increased by 17%, and the store’s female product SKUMonthly sales are significantly higher than other comparable stores.In 2018, the average sales of a single store in the company’s direct stores was 3.8 million yuan, ranking first among the top five sportswear and apparel retailers in China.The efficiency of inventory management is also good, 115.2 days in 2019Q1, significantly lower than the industry average of 180 days.Of course, Gao Song’s reconstruction of Belle’s women’s shoes business is far more complicated than fighting.After talking about mergers and acquisitions, a PE person close to Gaochun said to 36 , that the best acquisition method in China at this stage is not the operation method of Brazilian 3G capital on the beer company Budweiser InBev, that is, the complete acquisition, and thenIntervene in daily management, systematically cut costs, and then find ways to increase sales.But at this stage many Chinese companies, management is still in the previous generation, they lack understanding of new business.Therefore, the focus of integration at this time is not to cut costs, but to improve management efficiency and technological capabilities.In essence, the Chinese market has a good growth, and we should think about how to get a bigger market share through competition.Now Gao Song is the attempter of this idea. Gao Song built the strategy department of Belle, and also dispatched hundreds of technicians to do the information technology of the store, and the management team of Belle’s original business is still there.”This is doing addition, adding things that were not originally there,” said the PE person.Of course, such “addition” needs to be based on the ability to quickly “recover the principal”, and the listing of the company has completed this crucial step.A close reading of the strokes of the prospectus can be found that in 2018, the sudden increase in the amount of 2.22 billion yuan to pay related companies, which is much more than the previous year.And 45% of the proceeds from the listing of funds raised for the purpose of repayment of outstanding payments to Belle International and fellow subsidiaries, 26.8% for repayment of short-term bank loans, only 20% for company working capital or technologyTransformation and digital transformation.Source of data: The company’s prospectus follows the capital market’s recognition of the high growth of sportswear. The company’s listing has gained a high valuation, and its market value has surpassed the original parent company.In contrast, the improvement of Belle’s own brand business requires systematic transformation, including product design, brand image and store transformation, which will definitely take longer.It can be said that the successful listing of Qibo provides a more relaxed environment for Gaochun to transform Belle..