Bosideng: A Hidden Gem Alternative To Moncler

| About: Bosideng International (BSDGF)
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While visiting London over the holidays, we happened by chance to walk into a sleekly designed store called Bosideng (OTCPK:BSDGF) or {3998-HK} in the chic shopping district on South Molton Street.

After doing a bit of homework, it seems that Bosideng is a favorite in China. It has a retail chain of 14,000 outlets which sport the Bosideng, Snow Flying, Combo, Bengen and other Bosideng brands. Bosideng is known in the industry and in China for their line of down jackets which accounted for 76% of their sales last year. According to this January 14th announcement:

"Zantman Modegroep adds down-jacket label Bosideng to its assortment

Tuesday, 14 January 2014

The Zantman Modegroep, a Benelux based import and trading firm for fashion apparel, has announced a new joint venture with China's biggest down-jacket maker, Bosideng International Holding Company, and KeenOn, a German-based B2B e-commerce platfrom, part of Otto International GmbH's. ...

"I have never seen such a beautiful product offered at such a low price during my life while working in the garment industry," said Frans Zantman, CEO at Enelle Part of Zantman Modegroep, who decided to bring the sharply priced collections to the Netherlands."

Bosideng, the highest volume producer of down products globally, is producing products for other European brands and could cut into high flying Moncler's market-share (OTCPK:MONRF) which had a very successful IPO in late 2013 and currently has a $3.3 billion market-cap.

Earlier this month, Bosideng reportedly completed a $220 million loan facility which had been originally planned for $150 million and was increased due to increased demand according to "Bosideng facility rises to US$220m" excerpt:

IFR Asia 827 - January 11, 2014

The US$150m three-year term loan for Hong Kong-listed Bosideng International Holdings has been increased to US$220m, following commitments from 13 banks joining in general syndication.

The company is certainly not highly leveraged and has a very low debt to equity ratio after this new facility. Here is a snapshot from a Macquarie research report showing Bosideng's projected balance sheet:

After watching the following video showcasing the Bosideng down products you can get what a true sense of style this company has:

In addition, the store in London pictured above is very tastefully appointed in our opinion. The rumblings in the retail business say that Bosideng is looking to get into the US market this year by entering New York. So far, they are opening a pop-up shop at the Rothmans store on 18th and Park Ave. South, which is reported to be newly elected NYC Mayor DeBlasio's favorite store. In London, Bosideng bought the Greenwood's chain to enter their first western market and maybe they will do the same thing in the US.

The reinforcing fundamental pillar of this Chinese company is its large insider ownership and executive board. Here is a snapshot of the holdings and its composition from the company's website:

As you can see, the founder and Chairman Dekang GAO holds over 65% of the equity. This is important from two perspectives:

1. He has great motivation to do the right thing for shareholders as he is the largest one.

2. The company pays a dividend yielding over 8% annually and this will continue as it is a great source of personal cash flow for Dekang GAO.

Moreover, if the company can get traction in the western markets, it can greatly increase its operating margins from private label selling to other brands and receiving only wholesale prices to getting a much higher retail selling price utilizing their own brands. For investors considering the high flying Moncler, Bosideng can be a much more lucrative long term alternative especially at a time when many Chinese companies have been discredited in the eyes of western investors.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in BSDGF, over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.