China Sports

Tax savings to positively impact net profit in 2H08 and 2009. 1H08 EPS increased to RMB 15.6 cents per share. Another company with good fundamentals not reflected in the share price.

Nike may be No.1 in sales in China but when i visited a popular shopping district in China, i saw Nike\'s shop desserted. Boutiques carrying 2nd-3rd tier brands like Yeli on the other hand, were priced to draw crowds.

Thanks Eagle for that observation. This is good news as China Sports and China Eratat are in the same space. Do you know where I can buy those shoes made by either one of them here in S\'pore? I would just like to see the quality and branding of those and also maybe interview the retailer about the perception of their brands. I do not think that they have made much of an impact outside China: A&P etc but since China is 1/5 of the world population I guess that the biggest band for the buck would be to focus in their backyard.

erhmmm. i use Nike. this may be a personal view but i don\'t think the quality of many 2nd or 3rd tier sports brands in China can \"make it\" by Singaporean standards. i.e. the Nike or Mizuno user may be disappointed by Yeli quality but to China\'s man-in the street who earns Rmb 60,000 a year, the price makes a difference. What do i mean? Well, Nike\'s retail price range is more or less fixed worldwide. I.e. a pair of S$60 Nike running pants in Singapore retails in China about Rmb 300 (same type of design). Meanwhile, Chinese brands retail for Rmb 60 for the same \'type\' of pants. Even Li Ning cannot fight Nike\'s design even though the look and feel appears similar on the clothes rack. I have a Li Ning T-shirt that imitates Nike \'dry-feel\'. Looks the same, cost Rmb 150 but round collar was cut to close to neck (ie not comfortable). Nike users will tell why they pay the premium: its design is also most flattering. I.e. wearer really look cool lor.

There is always a market for 2nd and 3rd tier brands as with all consumer goods products. Everyone (almost) wants a beemer or merc but there is always room (plenty of it) for Toyotas, Nissans, Kia\'s etc. Price is a huge equalizer but of course the concern is the ability of Chinese brands to move up the value chain and also pass on the increase in raw materials. On the latter with a weaker brand it is quite difficult to do so compared to a brand that has mind share. As the economy slows down and pockets become tight you may see a shift in spending habits and suddenly the Erke brand and quality doesn;t look too bad after all and there goes another Nike fan or customer or market share. Having said so as for buying into the business; price is what you pay and value is what you get....aka Uncle Warren B. At the present moment, the price of Chinese related sports companies are definitely bargains no matter what matrix or discount you add to it. Do not discount Chinese ability to increase their brand perception and also quality levels...except for the milk scandle but look from the bright side...it can only get better from here! In time to come, Erke, Anta, Dapai(bags), Cheers (Man Wah)will close the gap from a qualitative perspective and will be able to price closer to the \'global brands\'. At the same time, their relative COGS would probably drop further due to economies of scale and margins will soar from an already high position. Another point you should be aware of is that this are consumer discretionary products and we\'re still in the early stages of a global slowdown so everyone will be hit. However as I said earlier price will be a bigger denominator in a tough environment. To your point about S\'pore standards...yes it will take more time but as the economic crunch hits home..lower price brands or house brands (fair price) typically wins over market share. BUT having said so...the prices of these stocks are almost discounting for a mother of global depression which is still an extremely remote possibility. BTW what Nike did you get...I\'m a \"CB Bata\" fan...only shoes mah.

to the integrated manufacturer-retailer, sports apparel gross margins can be double compared to shoes. this shows how much difference sophistication of apparel design (including fabric function) can make.