Hokkien mean - Xi De lang - Died People, Name also sui
We visited 2 Bursa -listed China shoe companies, Xidelang (XDL) and Multi Sports. The companies, based in Jinjiang produce 40% and 20% of China and the world’s shoes, and represent a cross section of China’s shoe industry. There is general optimism that the demand for shoes is strong and the companies, which remained resilient during the economic crisis, are optimistic on the outlook of the shoe industry. While there have been concerns over their credibility, the trip assured us that their businesses are genuine as both operate sizeable manufacturing facilities and are on track to launch new production lines. While 2009 has been a challenging year, the sector’s outlook for 2010 is expected to be more favourable as the high-end shoe segment regains its premium pricing. Multi Sports and XDL are trading at attractive valuations of 2.7x – 3x PERs versus the industry average of 6x for SGX and Bursa-listed China shoe companies. We value XDL and Multi Sports at RM1.24 and RM1.03 respectively based on Xingquan’s target PE of 5.4x FY10 EPS.