Wed, Jul 22, 2015 page13

• Makalot predicts double-digit growth

  TOP PICK: Daiwan Capital has chosen Makalot as its most preferred stock in the textile sector, as it has high US market exposure and is heavily invested in functional clothing

  • By Lauly Li / Staff reporter
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  Makalot Industrial Co (聚陽), a garment manufacturer for global clothing brands, expects this quarter and next quarter’s revenues to grow by at least a double-digit percentage year-on-year on the back of growing orders for functional clothing, Makalot chairman Frank Chou (周理平) said yesterday.

  “The final quarter of the year is usually slow for Makalot due to seasonal factors, but thanks to a global increase in demand for sportswear, orders for the fourth quarter are at least 20 percent more than the same period last year,” Chou told reporters on the sidelines of an investors’ conference in Taipei.

  Makalot reported unaudited pretax earnings of NT$1.32 billion (US$42.03 million) in the first half, up 29.1 percent annually, with consolidated revenue growing 12.4 percent to NT$10.75 billion from the same period last year.

  The company expects revenue contributions from functional clothing to grow from last year’s 8 percent to 12 percent this year, Chou said, adding that he foresees the segment accounting for at least 20 percent and becoming the firm’s main growth driver by 2017.

  Chou said Makalot’s main client Gap Inc, which contributed 25 percent of the firm’s total revenue last year, is gradually turning its focus from casual clothing to functional apparel.

  Makalot would help Gap integrate its manufacturing processes as part of the value-added service it provides to the client, Chou said.

  “This will be a good business opportunity for Makalot to help non-sportswear clients integrate their supply chains from choosing garments to manufacturing functional apparel,” he said, citing the firm’s ability to vertically integrate supply chains.

  The company’s functional clothing includes thermal insulation apparel, as well as yoga and jogging outfits.

  Commenting on a Japanese client, which Makalot secured in 2011, Chou said the revenue contribution from the client has exceeded the firm’s expectations and become its fourth-largest client.

  “The client contributed US$45 million, or 15 percent, of our revenue last year, and we expect its sales contribution this year to more than double to about US$100 million,” Chou said.

  Makalot did not specify the Japanese client, but analysts and industry watchers believe it is Fast Retailing Co, Japan’s biggest clothing retailer and the operator of Uniqlo.

  Daiwa Capital Markets Inc has made Makalot its top pick in the textile sector, citing the company’s high US market exposure and the growth potential of Fast Retailing, as well as its strong earnings visibility and the rising popularity of functional sportswear and outdoor clothing.

  “Makalot should continue to benefit from ongoing industry consolidation among apparel makers around the world and increase their importance to the global supply chain,” Daiwa said in a note to clients yesterday.

  Makalot’s sales in the second half are expected to be driven by shipment growth from existing clients, while gross margin this year might improve significantly from last year’s 21.67 percent due to a good product and client mix, Daiwa said.

  The brokerage forecast Malakot’s net profit would grow 30 percent from last year’s NT$1.7 billion and sales would expand 14 percent annually from NT$20.88 billion.

  Makalot shares declined 1.5 percent to NT$262 in Taipei trading yesterday, underperforming the TAIEX, which gained 0.34 percent.

  The stock price of the company has jumped 57.4 percent since the beginning of this year, while the TAIEX has declined 3.57 percent.
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