HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

Sa Sa International Hldgs / Equity Bottom-Up

<ul>
<li>Despite missing market consensus, <a href="https://www.smartkarma.com/entities/sa-sa-international-hldgs" target="_blank" data-smartkarma-citation="entities:20143:1" rel="noopener">Sa Sa International Hldgs (178 HK)</a>'s FY24 result still have silver linings. Its resumption of dividends with a 70% payout ratio is welcoming.</li>
<li>Tax credit in 2H23 has distorted comparison. At pre-tax level, 2H24 profit has gone up by 29.5%. Cost management is solid, generating a 0.9pp FY24 operating margin expansion. </li>
<li>While overall 1Q25 sales have dropped, mainland China sales surged 83.9%. The macro environment should have bottomed and government efforts to attract tourists will pay off.  </li>
</ul>


Despite missing market consensus, Sa Sa International Hldgs (178 HK)'s FY24 result still have silver linings. Its resumption of dividends with a 70% payout ratio is welcoming.
Tax credit in 2H23 has distorted comparison. At pre-tax level, 2H24 profit has gone up by 29.5%. Cost management is solid, generating a 0.9pp FY24 operating margin expansion. 
While overall 1Q25 sales have dropped, mainland China sales surged 83.9%. The macro environment should have bottomed and government efforts to attract tourists will pay off.  


Sa Sa Intl (178 HK): Every Coin Has Two Sides

<ul>
<li>We observed that businesses at <a href="https://www.smartkarma.com/entities/sa-sa-international-hldgs" target="_blank" data-smartkarma-citation="entities:20143:1" rel="noopener">Sa Sa International Hldgs (178 HK)</a> have picked up during the Chinese New Year, but a significant overall significant recovery is still lacked.</li>
<li>The full relaxation of mainland-HK border control has brought about a 110% surge in mainland arrival between 6 Feb and 11 Feb. This suggests that momentum is clearly building up. </li>
<li>Sa Sa has embarked on strategies like re-opening important stores, selectively increase store counts and re-adjusting staff arrangement and opening hours to capture the opportunities.</li>
</ul>


We observed that businesses at Sa Sa International Hldgs (178 HK) have picked up during the Chinese New Year, but a significant overall significant recovery is still lacked.
The full relaxation of mainland-HK border control has brought about a 110% surge in mainland arrival between 6 Feb and 11 Feb. This suggests that momentum is clearly building up. 
Sa Sa has embarked on strategies like re-opening important stores, selectively increase store counts and re-adjusting staff arrangement and opening hours to capture the opportunities.


Sa Sa Intl (178 HK): On-Ground Observations and Outlook

<ul>
<li>Masked by a high base, 4Q FY24 sales of <a href="https://www.smartkarma.com/entities/sa-sa-international-hldgs" target="_blank" data-smartkarma-citation="entities:20143:1" rel="noopener">Sa Sa International Hldgs (178 HK)</a> edged down by 4.1% YoY. However, sales for mainland China have increased by 18.2%.</li>
<li>Overall sales for FY24 are in line with market projections and there is potential for further margin expansion. Its 6.7x and 5.9x PERs for FY25F and FY26F are inexpensive.</li>
<li>The addition of more mainland cities to the Hong Kong individual visit scheme, promotion of Hong Kong tourism, and weaker USD in the medium term are all positive factors.</li>
</ul>


Masked by a high base, 4Q FY24 sales of Sa Sa International Hldgs (178 HK) edged down by 4.1% YoY. However, sales for mainland China have increased by 18.2%.
Overall sales for FY24 are in line with market projections and there is potential for further margin expansion. Its 6.7x and 5.9x PERs for FY25F and FY26F are inexpensive.
The addition of more mainland cities to the Hong Kong individual visit scheme, promotion of Hong Kong tourism, and weaker USD in the medium term are all positive factors.


Sa Sa Intl (178 HK): Steady Recovery, but Biased by High Base

<ul>
<li>3Q FY24 sales of <a href="https://www.smartkarma.com/entities/sa-sa-international-hldgs" target="_blank" data-smartkarma-citation="entities:20143:1" rel="noopener">Sa Sa International Hldgs (178 HK)</a> have recovered to 49% of the FY19 level. Although this is slower than market expectations, the improving trend remains intact.</li>
<li>Stronger Rmb, more attractions in Hong Kong, resumption of “multiple-entry permits" for Shenzhen residents, and more new stores at Sa Sa will drive the rest of this year. </li>
<li>Consensus forecasts are conservative, expecting FY24 earnings just 46% of FY19. With current share price down from HK$1.00-1.50 range during 2020, Sa Sa's valuations are too depressed.</li>
</ul>


3Q FY24 sales of Sa Sa International Hldgs (178 HK) have recovered to 49% of the FY19 level. Although this is slower than market expectations, the improving trend remains intact.
Stronger Rmb, more attractions in Hong Kong, resumption of “multiple-entry permits" for Shenzhen residents, and more new stores at Sa Sa will drive the rest of this year. 
Consensus forecasts are conservative, expecting FY24 earnings just 46% of FY19. With current share price down from HK$1.00-1.50 range during 2020, Sa Sa's valuations are too depressed.


Sa Sa Intl (178 HK): A Slow Recovery But......

Equity, Bottom-up Analyst, Investics Research

Sameer Taneja

Equity, Bottom-up Analyst

Investics Research

It is important to note that the information provided by Investics Research is based on publicly available data and own knowledge, which has been gathered and analyzed from a variety of sources. While every effort has been made to ensure the accuracy and completeness of the information provided, it is not guaranteed to be free from errors or omissions. All forecasts and estimates are based on information that has been obtained from public sources that are considered to be reliable. The sources include but are not limited to, company announcements, exchange filings, presentations, etc. Investics does not guarantee the accuracy and completeness of the forecasts, estimates, and/or other information.

Equity Bottom-up Research

Perfect Medical Health / Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/perfect-medical-health-management" target="_blank" data-smartkarma-citation="entities:3639:1" rel="noopener">Perfect Medical Health (1830 HK)</a>, post a correction of consumer discretionary stocks in HK, now trades at a yield of 11.5%, with cash&amp;investments representing 24% of the market cap.</li>
<li>HK is experiencing a dip in consumer sentiment, and <a href="https://www.smartkarma.com/entities/perfect-medical-health-management" target="_blank" data-smartkarma-citation="entities:3639:1" rel="noopener">t</a>he company isn't immune to it, but flat sales/profitability, a 24% net margin, and &gt;40% ROE provide great margin of safety.</li>
<li>The stock trades at 9.3x FY24 PE and 11.5% yield (assuming a 110% payout average across company history) with a growth option once the HK economy kickstarts.</li>
</ul>



Perfect Medical Health (1830 HK), post a correction of consumer discretionary stocks in HK, now trades at a yield of 11.5%, with cash&amp;investments representing 24% of the market cap.
HK is experiencing a dip in consumer sentiment, and the company isn't immune to it, but flat sales/profitability, a 24% net margin, and &gt;40% ROE provide great margin of safety.
The stock trades at 9.3x FY24 PE and 11.5% yield (assuming a 110% payout average across company history) with a growth option once the HK economy kickstarts.


Perfect Medical: Post Card From HK, Yield of 11.5%

Hong Kong

Sa Sa International Holdings Limited, through its subsidiaries, retails and wholesales cosmetics. The Company also provides beauty and health club services to members.

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Sa Sa International Hldgs (178 HK)

Sa Sa Intl (178 HK): Every Coin Has Two Sides

During the first 5 days of the Golden Week, over 980,000 mainland visitors arrived in Hong Kong, up 35% YoY. Macau's growth was 19% YoY. Stronger...

Osbert Tang, CFA

Sa Sa Intl (178 HK): On-Ground Observations and Outlook

Sa Sa's businesses have picked up during the Chinese New Year and we believe the momentum will further improve with the complete relaxation of...

Osbert Tang, CFA

Sa Sa Intl (178 HK): Steady Recovery, but Biased by High Base

Eight more cities in China will be added to the individual visit scheme to Hong Kong starting on 27 May. They are Taiyuan, Hohhot, Harbin, Lhasa,...

Osbert Tang, CFA

Sa Sa Intl (178 HK): A Slow Recovery But......

With more cities in mainland China to be opened for individual travels to Hong Kong and the relaxation of the travel permits of mainland visitors,...

Osbert Tang, CFA

Perfect Medical: Post Card From HK, Yield of 11.5%

We provide an update on Perfect Medical (1830 HK). The stock trades at 9.3x FY24 PE/11.5% yield (assuming a 110% payout) with a growth option once...

Sameer Taneja

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