HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

China Tourism Group Duty Free Corp Ltd / Equity Bottom-Up

<p>During the Golden Week, average daily (for 1-7 Oct) duty free sales amounted to Rmb126m in Hainan, or an impressive 142.7% YoY growth. Since the start of the new Hainan duty free policy, average daily duty free sales has increased by 53%, suggesting a solid trend of improvement. Duty free sales in Hainan in 3Q20 has now equaled to its total sales in the island in 1H20. In our view, this solid performance will reflect positively on <a href="https://www.smartkarma.com/entities/china-tourism-group-duty-free-corp-ltd" target="_blank" data-smartkarma-citation="entities:12278:1" rel="noopener">China Tourism Group Duty Free Corp Ltd (601888 CH)</a>'s quarterly result to be announced in late-Oct, and will serve as a positive share price catalyst. </p><p>While rising competition is a valid concern, we believe any estimate of their impacts is overblown in the near term. The formation of a joint venture between <a href="https://www.smartkarma.com/entities/alibaba-group" target="_blank" data-smartkarma-citation="entities:28434:1" rel="noopener">Alibaba Group (9988 HK)</a> and <a href="https://www.smartkarma.com/entities/dufry-ag" target="_blank" data-smartkarma-citation="entities:22344:1" rel="noopener">Dufry AG (DUFN SW)</a> to explore travel retail business opportunities in China is no difference. We believe CTG Duty Free's solid SOE status, unparalleled procurement and logistics capabilities, huge volume demand and excellent infrastructure are advantages difficult to challenge. </p>

During the Golden Week, average daily (for 1-7 Oct) duty free sales amounted to Rmb126m in Hainan, or an impressive 142.7% YoY growth. Since the start of the new Hainan duty free policy, average daily duty free sales has increased by 53%, suggesting a solid trend of improvement. Duty free sales in Hainan in 3Q20 has now equaled to its total sales in the island in 1H20. In our view, this solid performance will reflect positively on China Tourism Group Duty Free Corp Ltd (601888 CH)'s quarterly result to be announced in late-Oct, and will serve as a positive share price catalyst. While rising competition is a valid concern, we believe any estimate of their impacts is overblown in the near term. The formation of a joint venture between Alibaba Group (9988 HK) and Dufry AG (DUFN SW) to explore travel retail business opportunities in China is no difference. We believe CTG Duty Free's solid SOE status, unparalleled procurement and logistics capabilities, huge volume demand and excellent infrastructure are advantages difficult to challenge. 

CTG Duty Free Corp (601888 CH): Extending Solid Sales Track in the Golden Week

Investment Advisors, JL Warren Capital

Junheng Li

Investment Advisors

JL Warren Capital

JL Warren Capital LLC is a leading independent equity research firm focused on Chinese companies and listed multinationals in China. We employ a bottom-up research approach that takes great care to avoid the acquisition of material non-public information. Through investigative due diligence including channel surveys and interviews, our research helps clients to pinpoint the dislocations in the market.

Thematic (Sector/Industry)

<div>With only 40+ days left before the Presidential Election in the U.S, China is wisely taking a laissez faire approach to the bilateral issues and conflicts, waiting Trump out until after November. However, Beijing understands the White House’s targeting at China enjoys bipartisan support at this moment, one of the few exceptions of today’s politics in the U.S.</div>

With only 40+ days left before the Presidential Election in the U.S, China is wisely taking a laissez faire approach to the bilateral issues and conflicts, waiting Trump out until after November. However, Beijing understands the White House’s targeting at China enjoys bipartisan support at this moment, one of the few exceptions of today’s politics in the U.S.

<p>With more than half of the double festival holidays of China have now passed, we took an on-the-ground check for the business in the Golden Week. A walk along the Nanjing Road Pedestrian Walk in Shanghai with visits to various retail stores showed that consumption has witnessed a good, but not yet full, recovery.</p>
<p>We stopped by mobile phone, sportswear, jewellery and high-end luxury stores, and saw that mobile phone stores are witnessing the best customer patronage. Based on our visits, we observed that: 1.) Apple store (<a href="https://www.smartkarma.com/entities/apple-inc" target="_blank" data-smartkarma-citation="entities:666:1" rel="noopener">Apple Inc (AAPL US)</a>) is doing better than Huawei, 2.) Nike and Adidas (<a href="https://www.smartkarma.com/entities/topsports-international" target="_blank" data-smartkarma-citation="entities:28153:1" rel="noopener">Topsports International (6110 HK)</a>) &gt; FILA (<a href="https://www.smartkarma.com/entities/anta-sports-products-ltd" target="_blank" data-smartkarma-citation="entities:10261:1" rel="noopener">Anta Sports Products (2020 HK)</a>) and <a href="https://www.smartkarma.com/entities/li-ning-co-ltd" target="_blank" data-smartkarma-citation="entities:6047:1" rel="noopener">Li Ning Co Ltd (2331 HK)</a>, 3.) <a href="https://www.smartkarma.com/entities/chow-tai-fook-jewellery-group" target="_blank" data-smartkarma-citation="entities:549:1" rel="noopener">Chow Tai Fook Jewellery (1929 HK)</a> &gt; Lao Miao (<a href="https://www.smartkarma.com/entities/fosun-international-ltd" target="_blank" data-smartkarma-citation="entities:433:1" rel="noopener">Fosun International (656 HK)</a>) and 4.) high-end luxury goods are in good demand, and this is positive to <a href="https://www.smartkarma.com/entities/hang-lung-properties-ltd" target="_blank" data-smartkarma-citation="entities:49:1" rel="noopener">Hang Lung Properties (101 HK)</a> and <a href="https://www.smartkarma.com/entities/china-tourism-group-duty-free-corp-ltd" target="_blank" data-smartkarma-citation="entities:12278:1" rel="noopener">China Tourism Group Duty Free Corp Ltd (601888 CH)</a>. Read on for pictures and more details.</p>

With more than half of the double festival holidays of China have now passed, we took an on-the-ground check for the business in the Golden Week. A walk along the Nanjing Road Pedestrian Walk in Shanghai with visits to various retail stores showed that consumption has witnessed a good, but not yet full, recovery.
We stopped by mobile phone, sportswear, jewellery and high-end luxury stores, and saw that mobile phone stores are witnessing the best customer patronage. Based on our visits, we observed that: 1.) Apple store (Apple Inc (AAPL US)) is doing better than Huawei, 2.) Nike and Adidas (Topsports International (6110 HK)) &gt; FILA (Anta Sports Products (2020 HK)) and Li Ning Co Ltd (2331 HK), 3.) Chow Tai Fook Jewellery (1929 HK) &gt; Lao Miao (Fosun International (656 HK)) and 4.) high-end luxury goods are in good demand, and this is positive to Hang Lung Properties (101 HK) and China Tourism Group Duty Free Corp Ltd (601888 CH). Read on for pictures and more details.

China on the Ground: Hey, How's Your Golden Week?

Equity L/S Analyst | Forensic Accounting | India, Yellowstone Equity

Ankit Agrawal, CFA

Equity L/S Analyst | Forensic Accounting | India

Quantitative Analysis

<p>In this Smartkarma Original, we bring to you a quantitative approach for identifying Asian companies that are likely to raise/cut dividend. Applying this approach to a universe of 920+ companies listed across Asia helped us identify 150+ and 20+ companies, respectively, that have a high likelihood of raising/cutting dividends, over the next five years.</p>
<div class="content-highlight">
<p><strong>What's Original?</strong></p>
<ul>
<li>We have two separate models, one for forecasting Dividend Raise and the other for Dividend Cut.</li>
<li>Our back test results are very encouraging with &gt;90% hit rate for our Dividend Raise model and 100% hit rate for our Dividend Cut model.</li>
<li>For our Dividend Raise model, we apply a combination of eight stringent parameters and use last 7Y historical data to find companies that have consistently performed strong, lending our model a high hit rate.</li>
<li>For our Dividend Cut model, we differentiate from other models by focusing on companies that have had high dividend payout ratio (&gt;50%) over last 3Y. This criterion helps us in identifying companies where there is limited scope for dividend growth through increase in dividend payouts. In our observation, such companies are most vulnerable to cut dividend when faced with weakening fundamentals or deteriorating balance sheet.</li>
</ul>
</div>
<h3>Insight Flow</h3>
<ul>
<li>Live Dashboard</li>
<li> Methodology
<ul>
<li>Philosophy</li>
<li>Dividend Raise Model</li>
<li>Dividend Cut Model</li>
</ul>
</li>
<li>Universe</li>
<li>Back Test Results
<ul>
<li>Dividend Raise Model</li>
<li>Dividend Cut Model</li>
</ul>
</li>
<li>Model Results
<ul>
<li>Companies with High Probability of Dividend Raise</li>
<li>Companies with High Probability of Dividend Cut</li>
</ul>
</li>
<li>Model Risks &amp; Limitations</li>
<li>Conclusion</li>
</ul>

In this Smartkarma Original, we bring to you a quantitative approach for identifying Asian companies that are likely to raise/cut dividend. Applying this approach to a universe of 920+ companies listed across Asia helped us identify 150+ and 20+ companies, respectively, that have a high likelihood of raising/cutting dividends, over the next five years.

What's Original?

We have two separate models, one for forecasting Dividend Raise and the other for Dividend Cut.
Our back test results are very encouraging with &gt;90% hit rate for our Dividend Raise model and 100% hit rate for our Dividend Cut model.
For our Dividend Raise model, we apply a combination of eight stringent parameters and use last 7Y historical data to find companies that have consistently performed strong, lending our model a high hit rate.
For our Dividend Cut model, we differentiate from other models by focusing on companies that have had high dividend payout ratio (&gt;50%) over last 3Y. This criterion helps us in identifying companies where there is limited scope for dividend growth through increase in dividend payouts. In our observation, such companies are most vulnerable to cut dividend when faced with weakening fundamentals or deteriorating balance sheet.


Insight Flow

Live Dashboard
 Methodology

Philosophy
Dividend Raise Model
Dividend Cut Model


Universe
Back Test Results

Dividend Raise Model
Dividend Cut Model


Model Results

Companies with High Probability of Dividend Raise
Companies with High Probability of Dividend Cut


Model Risks &amp; Limitations
Conclusion


Asia Dividend Forecasting | The Rise and Fall of Dividends Across Asian Companies

<p><a href="https://www.smartkarma.com/entities/china-tourism-group-duty-free-corp-ltd" target="_blank" data-smartkarma-citation="entities:12278:1" rel="noopener">China Tourism Group Duty Free Corp Ltd (601888 CH)</a> (CTG Duty Free) reported a sharp QoQ turnaround in bottomline with profit of Rmb1.05bn in 2Q20, against a loss of Rmb120m in 1Q20. Sales at its Sanya and Haikou outlets surged a significant 12.2% and 136% YoY in the period, and this is even before the favourable Hainan duty free policy being rolled out in Jul.</p><p>Initial figures indicated that for 1 Jul to 18 Aug, total duty free sales in Hainan reached Rmb5bn, a 2.5x YoY increase with average daily sales of over Rmb100m.  Also, some 5m tourists visited Hainan in Jul, a decline of just 10.1% YoY. These figures add evidence to the strong momentum to CTG Duty Free's profit recovery in 2H20 and support the positive outlook for next two years. </p>

China Tourism Group Duty Free Corp Ltd (601888 CH) (CTG Duty Free) reported a sharp QoQ turnaround in bottomline with profit of Rmb1.05bn in 2Q20, against a loss of Rmb120m in 1Q20. Sales at its Sanya and Haikou outlets surged a significant 12.2% and 136% YoY in the period, and this is even before the favourable Hainan duty free policy being rolled out in Jul.Initial figures indicated that for 1 Jul to 18 Aug, total duty free sales in Hainan reached Rmb5bn, a 2.5x YoY increase with average daily sales of over Rmb100m.  Also, some 5m tourists visited Hainan in Jul, a decline of just 10.1% YoY. These figures add evidence to the strong momentum to CTG Duty Free's profit recovery in 2H20 and support the positive outlook for next two years. 

CTG Duty Free Corp (601888 CH): Good 2Q20 and Brighter Outlook for 2H20

China

China Tourism Group Duty Free Corporation Limited engages in sales of duty free goods and tax goods. The Company sells tobacco, wine and spirits, perfume, cosmetics, fashion and accessories, watches, jewelry, food, luggage products,and other products. China Tourism Group Duty Free also engages in investment and development of tourism destination commercial complexes.

China Tourism Group Duty Free Corp Ltd (601888 CH)

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

China Tourism Group Duty Free Corp Ltd (601888 CH)

CTG Duty Free Corp (601888 CH): Extending Solid Sales Track in the Golden Week

During the Golden Week, China Tourism Group Duty Free Corp Ltd (601888 CH) has recorded an average daily duty free sales of Rmb

Osbert Tang, CFA

China Macro and Geopolitical Briefing

With only 40+ days left before the Presidential Election in the U.S, China is wisely taking a laissez faire approach to the bilateral issues and...

JL Warren Capital

China on the Ground: Hey, How's Your Golden Week?

With more than

Osbert Tang, CFA

Asia Dividend Forecasting | The Rise and Fall of Dividends Across Asian Companies

Methodology Back Test Results Companied

Ankit Agrawal, CFA

CTG Duty Free Corp (601888 CH): Good 2Q20 and Brighter Outlook for 2H20

China Tourism Group Duty Free Corp Ltd (601888 CH) (CTG Duty Free) reported a sharp QoQ turnaround in bottomline with profit of Rmb1.05bn in 2Q20,...

Osbert Tang, CFA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)