Lucror Analytics

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High Yield Experts

Credit Analyst, Lucror Analytics

Chuanyi Zhou

Credit Analyst

Credit

Lifestyle International Holdings / Credit

Lifestyle International Holdings (1212 HK)

Lifestyle International (LIHL) has released improved H1/21 results, albeit the numbers remained weak and were significantly below the pre-COVID 19 levels. We expect sales to remain soft for the rest of FY 2021 as the inflow of tourists remains limited due to the pandemic. The company may expect a recovery in turnover if travel restrictions are lifted in 2022. That said, LIHL's retail operations have historically weathered industry downturns better than the average retailer. We are sceptical about the company’s cash balance, given that: [1] the cash balance generated very little interest income in H1/21, with an implied interest rate of only 0.1%; and [2] LIHL raised USD 350 mn through a Senior Notes issuance in June 2021 and USD 300 mn in July 2019, even though the cash position had been adequate. Our concerns about LIHL mainly involve: [1] the company's vulnerability to external shocks, given the nature of its business; [2] the uncertain financial performance, caused by the company's sizeable financial investments; [3] LIHL's aggressive investment appetite, even amid a challenging operating environment; [4] the slow progress of the Kai Tak project; [5] the company's commitment to transparency; and [6] our scepticism regarding the cash balance.

  Lifestyle International (LIHL) has released improved H1/21 results, albeit the numbers remained weak and were significantly below the pre-COVID 19 levels. We expect sales to remain soft for the rest of FY 2021 as the inflow of tourists remains limited due to the pandemic. The company may expect a recovery in turnover if travel restrictions are lifted in 2022. That said, LIHL's retail operations have historically weathered industry downturns better than the average retailer.   We are sceptical about the company’s cash balance, given that: [1] the cash balance generated very little interest income in H1/21, with an implied interest rate of only 0.1%; and [2] LIHL raised USD 350 mn through a Senior Notes issuance in June 2021 and USD 300 mn in July 2019, even though the cash position had been adequate.   Our concerns about LIHL mainly involve: [1] the company's vulnerability to external shocks, given the nature of its business; [2] the uncertain financial performance, caused by the company's sizeable financial investments; [3] LIHL's aggressive investment appetite, even amid a challenging operating environment; [4] the slow progress of the Kai Tak project; [5] the company's commitment to transparency; and [6] our scepticism regarding the cash balance. 

Lifestyle International - Earnings Flash - H1 FY 2021 Results - Lucror Analytics