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>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>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>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

Dickson Concepts (International) Limited, through its subsidiaries, sells watches and fashion products.  The Company also trades luxury goods, and provides management and technical services.

Symphony Holdings Limited, through its subsidiaries, manufactures and trades footwear products.  The Company also invests in properties.

Giordano International Limited, through its subsidiaries, retails and distributes casual apparel and accessories under theGiordano, Giordano Ladies, Giordano Junior, BSX and Concepts One brands.

Glorious Sun Enterprises Limited, through its subsidiaries, retails and exports casual wear apparel.  The Company also manufactures casual wear products and trades fabric.

Pou Sheng International (Holdings) Limited retails and wholesales sportswear, including sports footwear, apparel and accessories.

Oriental Watch Holdings Limited, through its subsidiaries, trades watches and invests in properties.

Goldlion Holdings Limited, through its subsidiaries, distributes and manufactures garments and accessories.  The Company also invests in properties and operates a commercial center with restaurants and a business center.

Emperor Watch & Jewellery Ltd retails luxurious branded watches, and offers design and sales of jewellery products.

Mulsanne Group Holding Limited offers omni channel branding and marketing services. The Company offers online advertising, social media campaign, and other services. Mulsanne Group Holding provides its services throughout China.

Auto Italia Holdings Limited distributes brand-name products including motor vehicles. The Company serves customers in Hong Kong, Macau, mainland China, and elsewhere in Asia.

Beijing Bashi Media Co., Ltd. provides urban bus transportation and advertising services.  The Company also provides taxi, inter-provincial transportation, car rental, and other transportation related services.

HONEYS. CO., LTD. plans, manufactures, and retails ladies' casual clothing and accessories.  The Company operates stores throughout Japan.

Kolao Holdings retails new and used cars, and provided repairs and maintenance services in Laos.  The company also retails motorcycles and automobile parts.

The Tile Shop Holdings, Inc. operates as a specialty retailer of manufactured and natural stone tiles, setting and maintenance materials, and related accessories. The Company offers porcelain, glass, ceramic, travertine, and other natural stones. Tile Shop Holdings serves customers in the United States.

PT Indomobil Sukses Internasional Tbk assembles, and distributes automobiles, buses, trucks, motorcycles, and their related parts. The Company provides automotive maintenance, financing, and rental services.  Indomobil also trades used cars.

The Aaron's Company, Inc. retails and leases consumer products. The Company offers furniture, electronics, appliances, computers, fitness, tools, and outdoor products. Aaron's serves customers in the United States and Canada.

Komehyo Co., Ltd. operates discount and recycle retail stores.  The Company sells jewelry, precious metal, watch, bag, Kimono, home appliances and musical instrument.

PT Mitra Pinasthika Mustika Tbk is an automotive company which provides distribution & retail for Honda motorcycles, manufacturing and distribution of auto parts such as lubricant oil, auto services such as car rental and auto-related financial services such as consumer financing and insurance.

XEBIO Holdings CO., LTD. engages in operating retail stores in Japan. Its stores offer sports equipment, including ski and snowboard wear, baseball, soccer, and golf equipment; and apparel, such as men's and women's casuals, house ware, children's clothing, knick-knacks, and accessories, as well as tailoring services.

Global Top E-Commerce Co.,Ltd. is in the businesses of cross-border E-commerce and the design, production and marketing of trouseres for men and women.

Global Top E-Commerce Co., Ltd. A (002640 CH)

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

Sa Sa's FY24 result is behind market expectations, but the resumption of dividends at a 70% payout ratio is encouraging. Despite a drop in 1Q25...

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

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): 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

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

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

​Sa Sa's FY24 result is behind market expectations, but the resumption of dividends at a 70% payout ratio is encouraging. Despite a drop in 1Q25...

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

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): 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's FY24 result is behind market expectations, but the resumption of dividends at a 70% payout ratio is encouraging. Despite a drop in 1Q25...

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