Shares in Camkids (CAMK: AIM), the Chinese maker and distributor of high-end outdoor clothing and footwear for children, trekked 2.5p higher to 102.5p after an impressive set of maiden full-year results.
The figures beat forecasts and showed that the recent string of Chinese floats on the London market have been of questionable quality. Dividends are expected to commence towards the end of this year.
Producing and selling everything from all weather jackets and hiking boots to tents and torches, Camkids came to Aim in December, raking in £6.4 million to accelerate growth and fund research and development of its high-end and often innovative products.
Having highlighted the company's potential two months ago in Shares (click here for the story), today's results will further help to raise awareness of the £75 million market cap.
Sales and taxable profits were up 23% and 25% to RMB 912.5 million (£96.1 million) and RMB 267.6 million (£28.2 million) respectively. Moreover, Camkids regaled the market with news of a strong start to 2013, noting orders for Spring/Summer 2013 are 22.5% higher than last year at RMB 406.3 million (£42.8 million).
During a year when many Chinese retailers were forced into discounting to shift stock, Camkids' gross margins scaled a new high of 37.1% (2011: 35.9%). Margin strength reflected economies of scale as distribution was expanded throughout mainland China, as well as Camkids' brand strength and pricing power. Since it invests in higher quality, innovative ranges, the company has been able to raise prices (notably in apparel and accessories ranges) and counter rising input costs.
Camkids' growth prospects are being driven by voracious appetite for branded and lifestyle orientated goods in China, where disposable incomes are on the rise. The company has yet to tap prospects in populous provinces such as Shanghai and Guangdong. Significantly, the government's 'one child policy' also means generations of doting parents and grandparents have the financial means to splash out on lavishing branded goods on children and grandchildren.
Founded in 1994 by chairman Zhang Congming, a former Chinese military man and one-time shoe salesman, Camkids' is strategically targeting the fast-growing domestic children's outdoor sportswear market. It is eschewing adult ranges, where demand can be less robust. Furthermore, its branded products are entirely based around outdoor sports such as hiking, mountain biking and camping. It is leaving markets such as running, football and basketball to other, often global, players.
In a bullish research note this morning, house broker Allenby Capital argues Camkids offers investors a way to play the rise in China's wealth. It writes: 'Our view is that China will not suffer a hard economic landing and instead will achieve growth rates substantially well in excess of mature western economies for several years to come. We believe a main beneficiary of this will be companies targeting the rising wealth accumulating within the domestic Chinese market such as Camkids.'
The broker believes Camkids is armed with more than RMB 200 million plus in cash, which means it has ample firepower to fund its expansion strategy and begin paying a dividend at the interim stage this year.
Following today's figures, Allenby has upgraded its 2013 and 2014 earnings estimates by 4% and 5% to 32.8p (2012: 27.7p) and 38p per share respectively. The broker sees pre-tax profits sprinting 18.3% higher to RMB 317 million (2012: RMB 268 million) this year, ahead of a further 16% rise to RMB 368 million next year.
