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>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>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>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......

<ul>
<li>Besides turnaround in the bottom line, <a href="https://www.smartkarma.com/entities/sa-sa-international-hldgs" target="_blank" data-smartkarma-citation="entities:20143:1" rel="noopener">Sa Sa International (178 HK)</a> achieved good store efficiency improvement and enviable cost control. It will enjoy further operating leverage.</li>
<li>The 5.3pp sequential increase in sales contribution from tourists highlights its position to benefit from revival of tourist arrivals. Three to-be-opened stores will boost sales momentum. </li>
<li>Initial sales figures for 3QFY24 point to 27% overall sales growth, which is encouraging. Sa Sa stays in a very solid financial position with HK$196m of net cash.</li>
</ul>


Besides turnaround in the bottom line, Sa Sa International (178 HK) achieved good store efficiency improvement and enviable cost control. It will enjoy further operating leverage.
The 5.3pp sequential increase in sales contribution from tourists highlights its position to benefit from revival of tourist arrivals. Three to-be-opened stores will boost sales momentum. 
Initial sales figures for 3QFY24 point to 27% overall sales growth, which is encouraging. Sa Sa stays in a very solid financial position with HK$196m of net cash.


Sa Sa Intl (178 HK): Many Bright Spots in 1HFY24 Result

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): 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): 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): 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

Sa Sa Intl (178 HK): Many Bright Spots in 1HFY24 Result

Sa Sa improved its store efficiency and cost control, benefiting from tourist arrival and sales revivals. 3QFY24 sales grew 27% initially and it...

Osbert Tang, CFA

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52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

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): 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): 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): 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

Sa Sa Intl (178 HK): Many Bright Spots in 1HFY24 Result

​Sa Sa improved its store efficiency and cost control, benefiting from tourist arrival and sales revivals. 3QFY24 sales grew 27% initially and it...

Osbert Tang, CFA

Sa Sa improved its store efficiency and cost control, benefiting from tourist arrival and sales revivals. 3QFY24 sales grew 27% initially and it...