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Red Dragonfly shoe "fly" into the large shares for the listing
Zhejiang Red Dragonfly Shoes Co., Ltd., a well-known shoe manufacturer in Zhejiang, has recently accelerated its capital market operations. The company is now actively preparing for an A-share listing and has already started preliminary preparations. On the day before yesterday, the stock of Dashang Shares surged to the daily limit following a major announcement about the latest market developments involving Red Dragonfly.
The "Red Dragonfly" has made a significant move by acquiring shares in Dashang Shares. According to the disclosure of large shareholders, after approval from the Dalian Municipal People's Government and the Dalian SASAC, three companies—Dalian City, Shenzhen Manifen Knitwear Co., Ltd., and Zhejiang Red Dragonfly Footwear Company, along with Bosideng AG—signed a 100% state-owned property rights transfer contract for Dashang Group. These three companies will transfer 40%, 33.33%, and 26.67% of their state-owned property rights, respectively.
As Dashang International, a wholly-owned subsidiary of Dashang Group, holds 8.8% of the shares (a total of 25,859,585 shares), once the transfer is approved by the relevant authorities, these three companies will indirectly hold Dashang Shares. Specifically, Red Dragonfly would own 8,619,000 shares, accounting for 2.93% of the issued shares. However, after the property rights transfer is approved, Dashang Investment Management Co., Ltd.—a company established by Dashang Group and key management members—will increase its stake. Following the capital increase, the shareholding ratios of the three companies and Dashang Investment will be 30%, 25%, 20%, and 25%, respectively. As a result, the indirect ownership of Dashang Shares by the parties will decrease to 2.64%, 2.2%, 1.76%, and 2.2%.
This positive news stimulated the stock market, although the broader market opened sharply lower. Dashang Shares rose throughout the day and eventually sealed the daily limit in the afternoon.
Looking ahead, Red Dragonfly plans to enter the A-share market next year, which may only be part of its broader expansion strategy. Recently, Qian Jinbo, Chairman of Red Dragonfly, mentioned in an interview that the company is actively promoting its A-share listing plan and aims to submit the application materials to the CSRC next year. According to executives, they hope to complete the listing by the end of 2010, expecting to issue 100 million shares.
Zhou Wenzhou, Chairman of SME Promotion, said that the Red Dragonfly’s entry into the stock market is both a great opportunity and a challenge. It can help accumulate listing experience and improve understanding of the market operation model, making their future IPO smoother.
Founded in 1995, Red Dragonfly has grown from a small shoe business into one of Wenzhou's most recognized brands. The group now includes more than 10 wholly-owned subsidiaries, such as Zhejiang Red Dragonfly Shoes Co., Ltd., Red Dragonfly Wenzhou Children's Products Company, Shanghai Jie Road Sporting Goods Company, and Guangzhou Hot Shoes Industry Co., Ltd.
According to a responsible person at Red Dragonfly Group, sales for the first nine months of this year increased by 29%, and profits rose by 30%. This growth rate is nearly the fastest among Wenzhou's shoe manufacturers.
Regarding the acquisition of Dashang Shares, the transfer price was set at 180 million yuan, with Manifen investing 73.86 million yuan, Red Dragonfly 61.44 million yuan, and Bosideng 49.25 million yuan. With a total of 25,859,585 shares transferred, the per-share price was less than 7 yuan. However, on the previous trading day, the closing price of Dashang Shares reached over 41 yuan, meaning Red Dragonfly acquired a valuable asset at a relatively low price.
In September this year, the 100% equity of Dashang Group was listed on the Dalian Property Exchange. At that time, Dalian SASAC imposed strict conditions on the transferees, requiring them to be production-oriented corporate legal persons with over 10 years of operating experience, long-term cooperation with Dashang Group, and providing main products for its department store business. They also needed to have the title of China Famous Brand and China Well-known Trademark.
Therefore, it can be said that Red Dragonfly and other private enterprises were carefully selected by Dalian SASAC to acquire Dashang Group. Yesterday, reporters attempted to contact Qian Jinbo, Chairman of Red Dragonfly Group, but his phone remained unanswered or disconnected.
As a well-known commercial chain, Dashang Shares has developed into a cross-regional leading enterprise, operating through three major formats: department stores, supermarkets, and electrical appliances. The company has basically completed its "store network in Northeast China," with over 100 stores across more than 30 cities in five provinces. In 2006, it ranked first in national department store retail sales.
However, according to a recent announcement by Dashang Shares on October 17, the company is expected to report a loss for the full year of 2009. Analysts attribute this to excessive expansion and blind store openings, which have negatively impacted performance. According to Qian Xiangjin, a principal analyst at CITIC Securities, the current fundamentals of the company suggest that the stock price is not cheap.
A responsible person at Red Dragonfly told reporters, “Red Dragonfly has always focused on the terminal market, and Dashang Group’s position in the commercial circulation field is also highly regarded. There are many valuable experiences and resources to learn from. Currently, the Red Dragonfly Group also owns another well-known sports brand, 'Czech Road,' and follows the route of the king of the terminal.â€