The luxury goods company taps China market, which is seen to be the world’s third-biggest market for luxury goods in 5 years.
Prada SpA is seeking to raise as much as $2.6 billion (HK$20.22 billion) in a Hong Kong initial public offering this month that would give the maker of Miu Miu handbags a higher valuation than most of its European rivals.
The Milan-based company set a price range of HK$36.50 ($4.69) to HK$48 a share, two people with knowledge of the matter said on Monday, declining to be identified as the process is confidential. The IPO would raise $2 billion (HK$15.56 billion) to $2.6 billion (HK$20.22 billion) based on the range, the people said. Including an overallotment option, the offering would raise as much as $3 billion (HK$23.34 billion), according to Bloomberg calculations.
Prada may command a higher price in Hong Kong than it would have at home because of Asian demand for luxury goods. China is forecast to be the world’s third-biggest market for luxury goods in five years, according to Bain & Co. The IPO values Prada at as much as 28 times 2011 profit as estimated by banks arranging the sale, one of the people said. Six comparable luxury-goods companies worldwide, including Burberry Group Plc (BRBY), trade at an average 21.1 times forecast full-year earnings, according to Goldman Sachs Group Inc. (GS)
On average, Chinese consumer companies “have a higher valuation than consumer companies elsewhere,” said Scilla Huang Sun, head of equities at Swiss & Global Asset Management in Zurich, who oversees about 4 billion Swiss francs (HK$37.22 billion). “But that’s also due probably to their higher growth potential. Also, all these Chinese companies have almost 100 percent exposure to the Chinese market, whereas luxury companies including Prada have only a partial exposure.”
Whether Prada gets the highest price depends on the market conditions in the coming days as markets are “a bit shaky at the moment,” Huang Sun said, adding that the top end of the range is “definitely on the high side.”
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