Luxury Goods Market Grows In China
By Greg Sushinsky
April 16, 2008
The focus on the ongoing economic growth story that is China
has been mostly centered on the expansion of capitalism and
opportunities for China’s growing middle class, but there is also a
growing upper class in China with an appetite for luxury goods.
Everything from luxury cars to high-end luggage, to clothing for
newly-affluent Chinese has also made its appearance, along with
the influx of goods and services for the burgeoning middle class. In
the apparel area, one small company, Omnialuo (OTC: OLOU) is
carving out a presence.
Omnialuo, headed by founder and CEO Zheng “Cindy” Luo,
award winning chief designer, designs, markets, distributes and
sells women’s clothing in China. The company is based in China’s
fashion capital, Shenzhen, and concentrates on fashionable
business casual clothing with products manufactured by fifteen
independent manufacturers, through its wholly owned subsidiary
Shenzhen Oriental Fashion Co. Ltd. The company operates
through a growing network of retail stores, and has gone from 84
stores in 2006 to 184 in 2007. Plans are set to expand to as many
as 250 retail outlets by the end of this year.
Although the company had a predecessor in Wentworth II, which
was formed in 2001, it changed its name and financial structure in a
complex technical deal engineered over the last couple of years.
Essentially, there was a $1 million reverse acquisition and share
exchange, along with private placement of stock, which resulted in a
$2.3 non-cash charge which effectively went against the earnings
numbers. So Omnialuo’s 2007 net income, which would have been
a positive $2.2 million in 2007, was recorded as a loss of just under
$1.1 million. This was on $7.9 million in revenues. Before the
charges were added in, the income would have been $0.10 per
share, which when fully diluted was recorded as a loss of $0.05 per
share. The complex financial re-structuring was intended to create
a stronger company going forward.
For 2008, the company expects revenue to be in the $13-$14
million range, with net income of $4.3-$4.6 million, which would put
EPS estimates at $0.19-$0.21. Growth estimates for 2009 put
potential revenues as high as $20 million. Omnialuo has a market
cap of $32 million, and has traded in the last year between $1.10
and $2.15 a share, with a recent close at $1.41. It is an over-the-
counter stock which trades on an average volume of about 5,000
shares daily.
As you can see, with rapid expansion and its strategic position in
China’s marketplace, Omnialuo has the seeds for dynamic growth.
Allowing for the accounting adjustments on 2007 income, Omnialuo
is producing revenue increases and looks to be ready to produce
income gains as well. With all stocks, but certainly with micro-caps,
it is essential to keep an eye on the earnings and its trajectory, and
it’s good to remember if you are more used to trading or investing in
larger-cap stocks, that with the smaller floats and fewer shares
traded in micro-cap stocks, sometimes trades may not be as easily
executed, and of course watch the larger percentage price swings
even on relatively small moves. But there are caveats for every
asset class, so simply know what you are buying, what to watch, and
how to proceed.
Omnialuo represents the opportunity to look at a small, fast-
growing company with a unique target market, as high-end, luxury
goods make inroads in China. With fashion, cars, jewelry, rising
social status, a greater desire for quality goods, and a new breed of
consumer coming to the fore in China, this is a time of rapid
change. Coach (NYSE: COH), BMW (XETRA: BMW:DE) and other
upscale brands are now appearing in China, something
inconceivable perhaps only a few years earlier. Chinese business
markets are dynamic, uncertain, volatile, rife with opportunity and
still poised for explosive growth, and Omnialuo’s CEO Cindy Luo’s
stated goal is to capture a large share of the new luxury portion of
that, to have her company become the Chinese brand equivalent of
Donna Karan or Liz Claiborne (NYSE: LIZ) in the near future.
By Greg Sushinsky
April 16, 2008
The focus on the ongoing economic growth story that is China
has been mostly centered on the expansion of capitalism and
opportunities for China’s growing middle class, but there is also a
growing upper class in China with an appetite for luxury goods.
Everything from luxury cars to high-end luggage, to clothing for
newly-affluent Chinese has also made its appearance, along with
the influx of goods and services for the burgeoning middle class. In
the apparel area, one small company, Omnialuo (OTC: OLOU) is
carving out a presence.
Omnialuo, headed by founder and CEO Zheng “Cindy” Luo,
award winning chief designer, designs, markets, distributes and
sells women’s clothing in China. The company is based in China’s
fashion capital, Shenzhen, and concentrates on fashionable
business casual clothing with products manufactured by fifteen
independent manufacturers, through its wholly owned subsidiary
Shenzhen Oriental Fashion Co. Ltd. The company operates
through a growing network of retail stores, and has gone from 84
stores in 2006 to 184 in 2007. Plans are set to expand to as many
as 250 retail outlets by the end of this year.
Although the company had a predecessor in Wentworth II, which
was formed in 2001, it changed its name and financial structure in a
complex technical deal engineered over the last couple of years.
Essentially, there was a $1 million reverse acquisition and share
exchange, along with private placement of stock, which resulted in a
$2.3 non-cash charge which effectively went against the earnings
numbers. So Omnialuo’s 2007 net income, which would have been
a positive $2.2 million in 2007, was recorded as a loss of just under
$1.1 million. This was on $7.9 million in revenues. Before the
charges were added in, the income would have been $0.10 per
share, which when fully diluted was recorded as a loss of $0.05 per
share. The complex financial re-structuring was intended to create
a stronger company going forward.
For 2008, the company expects revenue to be in the $13-$14
million range, with net income of $4.3-$4.6 million, which would put
EPS estimates at $0.19-$0.21. Growth estimates for 2009 put
potential revenues as high as $20 million. Omnialuo has a market
cap of $32 million, and has traded in the last year between $1.10
and $2.15 a share, with a recent close at $1.41. It is an over-the-
counter stock which trades on an average volume of about 5,000
shares daily.
As you can see, with rapid expansion and its strategic position in
China’s marketplace, Omnialuo has the seeds for dynamic growth.
Allowing for the accounting adjustments on 2007 income, Omnialuo
is producing revenue increases and looks to be ready to produce
income gains as well. With all stocks, but certainly with micro-caps,
it is essential to keep an eye on the earnings and its trajectory, and
it’s good to remember if you are more used to trading or investing in
larger-cap stocks, that with the smaller floats and fewer shares
traded in micro-cap stocks, sometimes trades may not be as easily
executed, and of course watch the larger percentage price swings
even on relatively small moves. But there are caveats for every
asset class, so simply know what you are buying, what to watch, and
how to proceed.
Omnialuo represents the opportunity to look at a small, fast-
growing company with a unique target market, as high-end, luxury
goods make inroads in China. With fashion, cars, jewelry, rising
social status, a greater desire for quality goods, and a new breed of
consumer coming to the fore in China, this is a time of rapid
change. Coach (NYSE: COH), BMW (XETRA: BMW:DE) and other
upscale brands are now appearing in China, something
inconceivable perhaps only a few years earlier. Chinese business
markets are dynamic, uncertain, volatile, rife with opportunity and
still poised for explosive growth, and Omnialuo’s CEO Cindy Luo’s
stated goal is to capture a large share of the new luxury portion of
that, to have her company become the Chinese brand equivalent of
Donna Karan or Liz Claiborne (NYSE: LIZ) in the near future.
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| Financial Articles by Greg Sushinsky |
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