‘We are not a bag company’, insists the well-connected Kelvin Yau, chairman and chief executive of Chinese outfit PAQ, ‘we’re a brand company.’

Floated in February with a modest funding, PAQ makes (in the low-cost PRC) and distributes own-brand protective bags for mobiles, laptops, mp3 players and more, while OEM clients include Samsonite and Circuit City.

Achieving healthy margins via its emphasis on design and brand building, PAQ has already established its brand outside China (70% of 2006 sales were generated in Europe) and is now going back into the gigantic domestic market, where newly found affluence is being spent on luxury goods, particularly by cash-rich young urbanites in densely populated cities such as Shanghai, Beijing and Shenzhen.

In a significant move, PAQ has just inked a product supply agreement with Suning Appliance, China’s second-largest consumer appliance retailer. Under the terms, 1,000 stores will exclusively sell PAQ products across the PRC. In addition, ahead of next month’s Beijing Olympics, PAQ has opened ten concessions within stores in Beijing, alongside a further four concessions in Shanghai and other parts of China.

Results for the 2007 calendar year revealed revenue growth of just over 35% to HK$67.3m (£4.3m), from which a 58% profits increase to HK$12.2m was produced. Computer electronic graduate Yau insists the group’s heritage as a white-labelled OEM manufacturer is ‘rapidly evolving’ into a high-margin business, and we would urge investors looking to buy into a brand-building venture offering China exposure to investigate further. Do remember, however, that the company remains very small, bearing associated risks, though rewards for the bold could prove lavish. Speculative buy.

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PAQ International Holdings	AIM	£2.11m	1.75p	0.00p
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