HK/China Equity Long-Short

Osbert Tang, CFA

Thematic (Sector/Industry)

<ul>
<li>There is an increasing likelihood that the duty-free quota of mainland tourists visiting Hong Kong will rise to Rmb30,000 from Rmb5,000. This will benefit many retail-related sectors.</li>
<li>
<a href="https://www.smartkarma.com/entities/luk-fook-holdings-intl-ltd" target="_blank" data-smartkarma-citation="entities:19054:1" rel="noopener">Luk Fook Holdings (590 HK)</a> is the best play among jewellery retailers given it has 65% of revenue from Hong Kong. <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> is the cosmetics play.</li>
<li>Property investors including <a href="https://www.smartkarma.com/entities/wharf-holdings-ltd" target="_blank" data-smartkarma-citation="entities:51:1" rel="noopener">Wharf Holdings (4 HK)</a> and <a href="https://www.smartkarma.com/entities/hysan-development-co" target="_blank" data-smartkarma-citation="entities:14169:1" rel="noopener">Hysan Development Co (14 HK)</a> will gain from the shopping malls in major tourist areas in Hong Kong.</li>
</ul>


There is an increasing likelihood that the duty-free quota of mainland tourists visiting Hong Kong will rise to Rmb30,000 from Rmb5,000. This will benefit many retail-related sectors.

Luk Fook Holdings (590 HK) is the best play among jewellery retailers given it has 65% of revenue from Hong Kong. Sa Sa International (178 HK) is the cosmetics play.
Property investors including Wharf Holdings (4 HK) and Hysan Development Co (14 HK) will gain from the shopping malls in major tourist areas in Hong Kong.


Increasing HK Duty Free Quota: The Beneficaries

Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/luk-fook-holdings-international-limited" target="_blank" data-smartkarma-citation="entities:19054:1" rel="noopener">Luk Fook (590 HK)</a>'s growth surpassed that of <a href="https://www.smartkarma.com/entities/chow-tai-fook-jewellery-group-limited" target="_blank" data-smartkarma-citation="entities:549:1" rel="noopener">Chow Tai Fook Jewellery (1929 HK)</a>'s in 2H FY26, providing evidence for its underlying operational resilience.  </li>
<li>CTF's 44.1% RSV growth for 1 Apr-31 May in HK is poised well for LF, given LF's higher exposure to HK, generating 69.4% of FY26 segment profit. </li>
<li>
<a href="https://www.smartkarma.com/entities/luk-fook-holdings-international-limited" target="_blank" data-smartkarma-citation="entities:19054:1" rel="noopener">Luk Fook (590 HK)</a>'s valuations are attractive, with a PER of 5.8x, a yield of 8.8%, and a P/B of 0.8x for FY27, vs. 11.1x, 6.8%, and 3.3% for CTF.</li>
</ul>



Luk Fook (590 HK)'s growth surpassed that of Chow Tai Fook Jewellery (1929 HK)'s in 2H FY26, providing evidence for its underlying operational resilience.  
CTF's 44.1% RSV growth for 1 Apr-31 May in HK is poised well for LF, given LF's higher exposure to HK, generating 69.4% of FY26 segment profit. 

Luk Fook (590 HK)'s valuations are attractive, with a PER of 5.8x, a yield of 8.8%, and a P/B of 0.8x for FY27, vs. 11.1x, 6.8%, and 3.3% for CTF.


China Pair Trade Update: Long Luk Fook (590 HK), Short Chow Tai Fook (1929 HK)

Chow Tai Fook Jewellery / Equity Bottom-Up

<ul>
<li>The market's assumption of no special dividends in <a href="https://www.smartkarma.com/entities/chow-tai-fook-jewellery-group" target="_blank" data-smartkarma-citation="entities:549:1" rel="noopener">Chow Tai Fook Jewellery (1929 HK)</a>'s upcoming FY24 result is conservative, and this does not fit into its usual pattern. </li>
<li>Should it pay special DPS, the dividend yield may reach an attractive 10.7%. With its net cash position, CTF can financially maintain the average 135.6% payout ratio. </li>
<li>A return to its historical average dividend yield of 7.4% means that CTF's share price will need to go up by 45% from the current level.</li>
</ul>


The market's assumption of no special dividends in Chow Tai Fook Jewellery (1929 HK)'s upcoming FY24 result is conservative, and this does not fit into its usual pattern. 
Should it pay special DPS, the dividend yield may reach an attractive 10.7%. With its net cash position, CTF can financially maintain the average 135.6% payout ratio. 
A return to its historical average dividend yield of 7.4% means that CTF's share price will need to go up by 45% from the current level.


Chow Tai Fook (1929 HK): What if Special Dividends Are Declared?

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 Management / Equity Bottom-Up

Perfect Medical Health Management (1830 HK)

<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%

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

<ul>
<li>Giordano, one of the most recognizable apparel business in Asia, has been improving its operations materially with solid growth in sales and profits. </li>
<li>Giordano provides very high dividend yield and payout. The consensus expects DPS of HKD 0.28 for Giordano in 2023, which would suggest a dividend yield of 12.8%. </li>
<li>We like the company's high dividend yield, loyal customer base, and attractive valuations. It is trading at EV/EBITDA of 3.6x and P/B of 1.5x. </li>
</ul>


Giordano, one of the most recognizable apparel business in Asia, has been improving its operations materially with solid growth in sales and profits. 
Giordano provides very high dividend yield and payout. The consensus expects DPS of HKD 0.28 for Giordano in 2023, which would suggest a dividend yield of 12.8%. 
We like the company's high dividend yield, loyal customer base, and attractive valuations. It is trading at EV/EBITDA of 3.6x and P/B of 1.5x. 


Asian Dividend Gems: Giordano International

Hong Kong

Chow Tai Fook Jewellery Group Limited is a leading luxury jeweler that manufactures and sells a wide range of jewelry products, including gem-set, platinum, k-gold, and gold jewelry, as well as distributing watches. The company operates a vertically integrated business model, from diamond sourcing and manufacturing to retail and after-sales services, through both physical stores and online platforms. It was founded in 1929 and is headquartered in Hong Kong.

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Chow Tai Fook Jewellery (1929 HK)

Increasing HK Duty Free Quota: The Beneficaries

Potential increase in duty-free quota for mainland visitors to Hong Kong to benefit retail sectors, with Luk Fook as the top jewellery play, Sa Sa...

Osbert Tang, CFA

China Pair Trade Update: Long Luk Fook (590 HK), Short Chow Tai Fook (1929 HK)

Luk Fook's 1Q FY27 retail sales revenue surged 32% YoY, beating Chow Tai Fook's Apr-May YoY growth of 14.7%. While its HK& Macao growth of 41% is...

Osbert Tang, CFA

Chow Tai Fook (1929 HK): What if Special Dividends Are Declared?

The market's assumption of no special dividends for CTF's FY24 result may be off - potential for an attractive 10.7% yield. The share price could...

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

Asian Dividend Gems: Giordano International

Giordano, a prominent Asian apparel business, has seen significant improvements in sales and profits. It offers a high dividend yield and payout,...

Douglas Kim

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Increasing HK Duty Free Quota: The Beneficaries

​Potential increase in duty-free quota for mainland visitors to Hong Kong to benefit retail sectors, with Luk Fook as the top jewellery play, Sa Sa...

Osbert Tang, CFA

China Pair Trade Update: Long Luk Fook (590 HK), Short Chow Tai Fook (1929 HK)

Luk Fook's 1Q FY27 retail sales revenue surged 32% YoY, beating Chow Tai Fook's Apr-May YoY growth of 14.7%. While its HK& Macao growth of 41% is...

Osbert Tang, CFA

Chow Tai Fook (1929 HK): What if Special Dividends Are Declared?

​The market's assumption of no special dividends for CTF's FY24 result may be off - potential for an attractive 10.7% yield. The share price could...

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

Asian Dividend Gems: Giordano International

​Giordano, a prominent Asian apparel business, has seen significant improvements in sales and profits. It offers a high dividend yield and payout,...

Douglas Kim

Potential increase in duty-free quota for mainland visitors to Hong Kong to benefit retail sectors, with Luk Fook as the top jewellery play, Sa Sa...

The market's assumption of no special dividends for CTF's FY24 result may be off - potential for an attractive 10.7% yield. The share price could...

Giordano, a prominent Asian apparel business, has seen significant improvements in sales and profits. It offers a high dividend yield and payout,...