Goodbaby seeks $190 million from Hong Kong IPO

Demand from institutional investors is strong on the first day of
bookbuilding as the Chinese maker of children's strollers offers its
shares at a significant discount to domestic peer Boshiwa.

Another Chinese children's product company is in the market to make
the most of the demand for Chinese consumption plays. Goodbaby
International Holdings, which specialises in baby strollers, kicked
off the bookbuilding for an initial public offering of up to HK$1.47
billion ($190 million) in Hong Kong yesterday.

If successful, it will be the second children's product play to list
in Hong Kong in two months following clothes manufacturer Boshiwa. The
latter started trading at the end of September after raising $368
million in an IPO.

Goodbaby principally engages in the design, research and development,
manufacturing, marketing and sale of children's strollers and car
safety seats. It produces one of every 2.9 strollers in China, North
America and its European markets. In 2009, the strollers Goodbaby
supplied accounted for 55.1% of the total number of strollers sold in
North America and 34.1% of the total retail value of these products,
the company said in a preliminary IPO prospectus.

Jiangsu-based Goodbaby is offering 300 million shares at a price
between HK$3.70 and HK$4.90 per share, which suggests the company
could raise between HK$1.11 billion and HK$1.47 billion ($143 million
to $190 million).

Based on the company's forecast earnings for 2011, the indicated price
range represents a price-to-earnings ratio of 12.4 to16.4 times. By
comparison, Boshiwa's IPO price of HK$4.98 translated into 19.1 times
its 2011 projected earnings. However, the share price has rallied
since the debut and yesterday Boshiwa closed 48% above its IPO price
at HK$7.38. This means it is now trading at a 2011 P/E multiple of
28.3 times.

Demand from institutional investors for Goodbaby's offering was "very
strong" on the first day of bookbuilding yesterday, according to
sources.

The offering consists of 67% primary shares and 33% secondary shares,
which are sold by two existing shareholders -- PUD, a company partly
owned by Goodbaby's executive directors, and CRF, an investment firm.
Some 90% of the shares are targeted at institutional investors, while
the remaining 10% are earmarked for the Hong Kong retail offering. The
split is subject to standard clawback adjustments.

As usual, the deal also comes with a 15% greenshoe option which, if
fully exercised, will allow the company to raise up to $218 million,
by issuing an additional 45 million primary shares.

There are no cornerstone investors participating in the deal.

The share price will be fixed on November 16 and the expected listing
date is November 24. Morgan Stanley is the sole global coordinator and
bookrunner of the deal.

Goodbaby made HK$164.4 million of profits in 2009, down from HK$173.5
million in the previous year. The decline was due to the global
financial crisis as the economic downturn made consumers more cautious
about their spending, the company said. The profit in the first seven
months this year amounted to HK$141.5 million, which represents a
42.4% increase compared to the same period in 2009.

As of July 31, 2010, Goodbaby's distribution network covered 28
provinces, autonomous regions and municipalities in China and it had
5,297 maternity and childcare specialty stores, 835 hypermarket
outlets, and 664 department store outlets. It has 451 distributors in
China.

Although personal income in China has been increasing with economic
growth and rapid urbanisation in China, Chinese parents spend less on
children's products than their Western counterparts, suggesting there
could be huge growth potential.

From 2005 to 2009, the per capital annual disposable income of urban
households in China increased from $1,281 to $2,514, while per capita
annual net income of rural households increased from $397 to $759.

In 2009, the consumption of durable children's products per capita in
the US and Europe was approximately $143 and $114, respectively. In
China, that same number was only $42. China also has around 44 million
children that are six years and younger -- much higher than the number
of children of the same age in developed countries, Goodbaby said in
the IPO statement.