Global Special Situations & Strategy, SR Services Ltd

David Lepper

Global Special Situations & Strategy

SR Services Ltd

SR Services provides Strategic Knowledge and Solutions services for Family Offices and Corporate Business. 

We deliver this via advisory services, strategic planning, opportunity analysis/sourcing, as well as solution implementation. 

Whilst, we create intellectual discipline and operational leverage for your projects or daily activities, our ultimate objective is to empower whilst enhancing your decision making. 

Strategic Knowledge and Solutions

Equity Bottom-Up

<h2>Regaining race pace, after a stumble</h2><p><a href="https://www.smartkarma.com/entities/18118" target="_blank" data-smartkarma-citation="entities:18118:1">Xtep International Holdings (1368 HK)</a> has exposure to three themes. The first is the emergence of domestic Chinese Consumer brands, the second is the reacceleration of domestic consumption and the third is one of a company turnaround. With Xtep buying back their shares and its directors buying shares for their own account, one should sit up and take notice. In the statement announcing the buyback, Xtep stated that it expects the Group’s financial performance to improve in 2018, and cash flow to be stronger comparing the past three years. Our analysis concludes this to be a rational expectation and that the changes made to date should also serve to support any further significant share price downside.</p><p>Moreover, with a net cash position of HK$1.77/share at the end of December 2017 or c73% of Book Value per share, a buyback is a rational use of funds and perhaps signals no immediate acquisitions on the horizon. This is not a bad factor, rather one stating that management realises a turnaround is required and that the general near-term cash flow can pay back shareholder loyalty as this is delivered. Hence, should result prove to be mediocre at a current entry level of HK$4.30-4.45/share, investors have some margin of safety, being compensated with an ordinary dividend yield of c4.5% and above average returns from the balance sheet. This margin of safety is supported by the special dividend declared with the 2017 full year results, of HK$0.10/share (ex-10th May 2018 and paid on 6th June 2018)</p>

Regaining race pace, after a stumbleXtep International Holdings (1368 HK) has exposure to three themes. The first is the emergence of domestic Chinese Consumer brands, the second is the reacceleration of domestic consumption and the third is one of a company turnaround. With Xtep buying back their shares and its directors buying shares for their own account, one should sit up and take notice. In the statement announcing the buyback, Xtep stated that it expects the Group’s financial performance to improve in 2018, and cash flow to be stronger comparing the past three years. Our analysis concludes this to be a rational expectation and that the changes made to date should also serve to support any further significant share price downside.Moreover, with a net cash position of HK$1.77/share at the end of December 2017 or c73% of Book Value per share, a buyback is a rational use of funds and perhaps signals no immediate acquisitions on the horizon. This is not a bad factor, rather one stating that management realises a turnaround is required and that the general near-term cash flow can pay back shareholder loyalty as this is delivered. Hence, should result prove to be mediocre at a current entry level of HK$4.30-4.45/share, investors have some margin of safety, being compensated with an ordinary dividend yield of c4.5% and above average returns from the balance sheet. This margin of safety is supported by the special dividend declared with the 2017 full year results, of HK$0.10/share (ex-10th May 2018 and paid on 6th June 2018)

Notes from the Silk Road: Xtep Int'l Holdings (1368 HK)

Quantamental Researcher, JD Finance Quantamental Research

Ben Li

Quantamental Researcher

JD Finance Quantamental Research

JD Finance Big Data Quantamental Research is a data and insight provider of proprietary online eCommerce data, under the arm of big data analytics team in JD Finance. JD Finance is an affiliate of US listed JD, a leading eCommerce player in China. It is one of the largest fintech companies in China, with business spanning across consumer loans, fund distribution, and quantitative strategy research. 

Thematic (Sector/Industry)

<ul class=""><li>China Sportswear sales accelerated in 2017Q3, showing 34% Y/Y growth.</li><li>Top US companies won the race among all other sportswear companies, especially in the Sports Shoes sector, revenue went up by 70% versus year ago.</li><li>Sports Apparel is losing momentum in 2017Q3, Y/Y growth in September dropped to the lowest point in recent months.</li></ul><p><em>Related tickers: <a href="https://www.smartkarma.com/entities/10261" target="_blank" data-smartkarma-citation="entities:10261">Anta Sports Products Ltd (2020 HK)</a>, <a href="https://www.smartkarma.com/entities/18118" target="_blank" data-smartkarma-citation="entities:18118">Xtep International Holdings (1368 HK)</a>, <a href="https://www.smartkarma.com/entities/6047" target="_blank" data-smartkarma-citation="entities:6047">Li Ning Co Ltd (2331 HK)</a>, <a href="https://www.smartkarma.com/entities/6658" target="_blank" data-smartkarma-citation="entities:6658">Nike Inc Cl B (NKE US)</a>, <a href="https://www.smartkarma.com/entities/25994" target="_blank" data-smartkarma-citation="entities:25994">adidas AG (ADDYY US)</a>, <a href="https://www.smartkarma.com/entities/11401" target="_blank" data-smartkarma-citation="entities:11401">Under Armour Inc Class A (UA US)</a>, <a href="https://www.smartkarma.com/entities/1597" target="_blank" data-smartkarma-citation="entities:1597">Skechers Usa Inc Cl A (SKX US)</a>. For more brand-level data, please send us a private message.</em></p>

China Sportswear sales accelerated in 2017Q3, showing 34% Y/Y growth.Top US companies won the race among all other sportswear companies, especially in the Sports Shoes sector, revenue went up by 70% versus year ago.Sports Apparel is losing momentum in 2017Q3, Y/Y growth in September dropped to the lowest point in recent months.Related tickers: Anta Sports Products Ltd (2020 HK), Xtep International Holdings (1368 HK), Li Ning Co Ltd (2331 HK), Nike Inc Cl B (NKE US), adidas AG (ADDYY US), Under Armour Inc Class A (UA US), Skechers Usa Inc Cl A (SKX US). For more brand-level data, please send us a private message.

3Q17 China Online Sportswear– Top US Brands Well Performed but Sports Apparel Showed Downside Risk

China

Xtep International Holdings Ltd. designs, manufactures, and markets sportwear. The Company produces footwear, apparel, and accessories.

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Xtep International (1368 HK)

Notes from the Silk Road: Xtep Int'l Holdings (1368 HK)

Regaining race pace, after a stumbleXtep International Holdings (1368 HK) has exposure to three themes. The first is the emergence of domestic...

David Lepper

3Q17 China Online Sportswear– Top US Brands Well Performed but Sports Apparel Showed Downside Risk

China Sportswear sales accelerated in 2017Q3, showing 34% Y/Y growth. Top US companies won the race among all other sportswear companies,...

Ben Li

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