In recent years, Giordano (0709.HK), who has often become the protagonist of the acquisition of rumors, has seen heavy volume surges in the past two days, and then he has exploded asset sales transactions. The company's shares rose by 9% this week, with trading volume up to 102 million shares, far higher than the 9.17 million shares on Tuesday. Giordano continued to soar yesterday, closing at HK$3.06, gaining 7.746% for the day, with the intraday maximum gains of 13% and turnover of 17.66 million shares throughout the day. In the past two trading days, Giordano has risen by 15%. Is there a suspected insider trading?
Yesterday, Giordano announced that the company is conducting non-binding preliminary negotiations on transactions such as acquisitions and sale of assets. If implemented, it may be a transaction such as the acquisition and sale of assets. Apart from this, the company is not aware of any reason for the increase in trading volume of the shares. The company confirmed that there is currently no negotiation or agreement on the acquisition or sale that must be made public.
Before the news was released, there have been changes. Henderson Development (0097.HK), which recently announced the possible sale of certain assets, suddenly surged 1.04 times on Wednesday, and the company released the announcement after the close.
The abnormal performance of the stock prices of the two companies inevitably conjectures the existence of suspected insider trading. Ye Shangzhi, the manager of the First Shanghai Research Department, said that since neither company has reached any agreement on possible sale, nor is it known about the details and pricing of the assets sold, it is difficult to determine whether there is any suspicion of insider trading. In addition, the Hong Kong Stock Exchange and the Hong Kong Securities Regulatory Commission will closely monitor the intraday trading of stocks. If there is suspicion, the regulators will use the transaction data to understand the actual trading situation. Giordano spokesman also repeatedly told reporters that the company did not leak inside.
Acquisition rumors are heard
As early as August 2006, FastRetailing (FR), a holding company of the well-known casual brand Uniqlo, once expressed interest in Giordano. Giordano's stock price rose by nearly 20% in a single day under the stimulation of foreign acquisitions. However, FR later decided to refrain from making an offer based on the fact that Giordano’s share price did not reflect his operating status and intrinsic value. As soon as this news was announced, Giordano’s share price plummeted and the intraday intraday decline reached 16.3%. Since the high of 4.885 Hong Kong dollars in August 2006 to yesterday's closing, Giordano has dropped by 37% in total.
In addition to FR, in the middle of last year, there were reports of the joint purchase of Giordano by four major apparel retailers, but it was confirmed that it was only market rumors.
Three major selling points
Analysts pointed out that the reason why Giordano often became the protagonist of asset acquisition rumors, mainly due to three major reasons.
On the one hand is because Giordano's ownership structure is too scattered. Since the founding of Giordano, the chairman of Gifu Media (0282.HK), Lai Chi-ying, placed the remaining 27% in 1996, Giordano has no single major shareholder. This is more vulnerable to criticism from the consortium.
On the other hand, Giordano’s performance in recent years has been very weak, making the stock price trend sluggish, which also provides potential buyers with acquisition opportunities. In early 2007, Giordano had made additional provision for foreign-invested companies and foreign corporate income taxes as a result, resulting in a sharp drop of 50% in net profit in 2006. By mid-2007, the company's net profit still did not pick up, falling 5.3% from the same period last year to HK$143 million; gross margin fell 240 basis points to 48.1%, compared to 50.5% in the same period of last year.
Finally, Giordano's clothing retail business in the Mainland is another key point to attract buyers. Although overall performance in the middle of last year was weak, Giordano’s turnover in the mainland continued to grow by 26.9% year-on-year to HK$599 million. The mainland market is the fastest growing market in all Giordano markets. During the reporting period, Giordano added 41 outlets in the Mainland, bringing the distribution network to 770.
operating
Prudent holdings can not be chased
Analysts believe that currently Giordano does not disclose in detail the possible acquisitions. There are still many uncertainties and it is difficult to determine the reasonable value of the stock. Ye Shangzhi believes that Giordano's current share price is at a low level for four years. Even if there is no news of the acquisition, the stock price will bottom out and the news of the acquisition will only intensify the gains. For investors who do not hold shares, the risk of a short-term recovery is high because the broader market has not yet stabilized. For investors holding shares, the short-term can wait and see, but pay attention to changes in trading volume. If there is no effective enlargement of future volume, the upside may be limited.
BNP has recently lowered Giordano’s investment rating from “buy†to “hold†and lowered the target price from HK$4.15 to HK$3, mainly reflecting the risk that the company may reduce its dividend. BNP said that the company's rapid expansion of the mainland market between 2008 and 2010 led to a rise in capital expenditure. It is estimated that net cash will decline in the next three years and may reduce the dividend payout. The current forecasted 2009 rate of return is 8.5%, but The worst-case estimated yield is only 2.9%.