M Stanley: HK Retailers Not Out of Risks; Cuts TPs of Chow Sang Sang, Luk Fook, Sa Sa
Morgan Stanley, in its report, lowered the estimates on HK-based jewelry and cosmetic retailers, including CHOW SANG SANG (00116.HK) -0.160 (-1.203%)
Short selling $276.46K; Ratio 31.723% , LUK FOOK HOLD (00590.HK) 0.000 (0.000%) Short selling $1.38M; Ratio 13.647% , CHOW TAI FOOK (01929.HK) -0.010 (-0.192%) Short selling $1.06M; Ratio 14.233% and SA SA INT'L (00178.HK) +0.070 (+2.583%) Short selling $1.82M; Ratio 17.533% , to reflect persistent headwinds from declining Chinese tourist arrivals and per capita visitor spending. The broker cut the target prices of CHOW SANG SANG, LUK FOOK HOLD and SA SA INT'L to $11.7, $14.3 and $1.4 from $15.2, $21.6 and $2.6. On average for the 4 retailers, the broker expected net profit declines of 11% yearly this year (ending Mar 2017), based on SSS-declines of 12% in HK/Macau and 7% in China. It believed CTF and Sa Sa (both were maintained at Underweight) presented the greatest de-rating risks, while Luk Fook and Chow Sang Sang's valuation looked more reasonable (kept Equalweight).
The broker expected to see 10% declines in rental costs on existing stores this year, as it expected rental renewals of 30-40% this year for prime tourist areas. While the broker viewed April/May likely saw narrower SSS declines sequentially, it still expected double-digit SSS declines in HK/Macau for both for the full year.
Morgan Stanley, in its report, lowered the estimates on HK-based jewelry and cosmetic retailers, including CHOW SANG SANG (00116.HK) -0.160 (-1.203%)
Short selling $276.46K; Ratio 31.723% , LUK FOOK HOLD (00590.HK) 0.000 (0.000%) Short selling $1.38M; Ratio 13.647% , CHOW TAI FOOK (01929.HK) -0.010 (-0.192%) Short selling $1.06M; Ratio 14.233% and SA SA INT'L (00178.HK) +0.070 (+2.583%) Short selling $1.82M; Ratio 17.533% , to reflect persistent headwinds from declining Chinese tourist arrivals and per capita visitor spending. The broker cut the target prices of CHOW SANG SANG, LUK FOOK HOLD and SA SA INT'L to $11.7, $14.3 and $1.4 from $15.2, $21.6 and $2.6. On average for the 4 retailers, the broker expected net profit declines of 11% yearly this year (ending Mar 2017), based on SSS-declines of 12% in HK/Macau and 7% in China. It believed CTF and Sa Sa (both were maintained at Underweight) presented the greatest de-rating risks, while Luk Fook and Chow Sang Sang's valuation looked more reasonable (kept Equalweight).The broker expected to see 10% declines in rental costs on existing stores this year, as it expected rental renewals of 30-40% this year for prime tourist areas. While the broker viewed April/May likely saw narrower SSS declines sequentially, it still expected double-digit SSS declines in HK/Macau for both for the full year.
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