Stock News: China Hongxing robust earnings in next 3 years!

China Hongxing Sports Ltd, which makes sports shoes, said it expects robust earnings in the next three years. The company forecasts net profit to rise to 180 mln yuan this year from 127.53 mln in 2005, and increase further to 300 mln next year and to 400 mln in 2008. The forecast was made as a guarantee to the 80 mln redeemable convertible non-cumulative preference shares (RCPS) the company is selling at 1.25 sgd each to US-based fund manager Och-Ziff Capital Management Group and CIM VII Ltd. Net proceeds of 95 mln sgd will be used to finance the group's expansion plans, provide working capital, and step up marketing efforts. "The RCPS is a great way for us to gain access to funds to accelerate our growth, while at the same time having the benefit of not immediately diluting the shareholding of existing shareholders," China Hongxing CEO and executive director Wu Rongguang said. "The proceeds from the RCPS will enable us to accelerate the construction of Phase 2 of our production facilities. Commercial production is expected to commence by the second quarter of 2007, instead of fourth quarter as originally planned," Wu said. "This will add approximately 5.6 mln pairs of shoes to our capacity per annum. The full completion of Phase 1 and 2 of our production facility will bring our total annual production capacity to approximately 16.8 mln pairs of shoes." China Hongxing will raise another 100 mln sgd once the preference shares are fully converted into shares at 1.25 sgd each, subject to the company meeting profit targets set between 2006 and 2008. Upon full conversion of the RCPS, Och-Ziff will hold a 16.7 pct stake in the Chinese shoemaker.