HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

Sa Sa International Hldgs / Equity Bottom-Up

<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>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

<ul>
<li>Market expectation for FY23/24 earnings 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> is overly conservative. It achieved HK$110-125m of profit in 1H, and 2H is the normal peak season.</li>
<li>Offline sales in 2Q23/24 recovered to 47.2% of the 2019 level and the rebound in mainland tourist arrivals should boost sales over the next 12 months. </li>
<li>Lower rent costs should allow for higher operating leverage as revenue revives. Its gross margin for 1H23/24 has further expanded and we think this trend can be sustained. </li>
</ul>


Market expectation for FY23/24 earnings of Sa Sa International Hldgs (178 HK) is overly conservative. It achieved HK$110-125m of profit in 1H, and 2H is the normal peak season.
Offline sales in 2Q23/24 recovered to 47.2% of the 2019 level and the rebound in mainland tourist arrivals should boost sales over the next 12 months. 
Lower rent costs should allow for higher operating leverage as revenue revives. Its gross margin for 1H23/24 has further expanded and we think this trend can be sustained. 


Sa Sa Intl (178 HK): Revival Well on Track

Asian Insight Provider - Actionable ideas, CrossASEAN Research

Henry Soediarko

Asian Insight Provider - Actionable ideas

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

<ul>
<li>The share price of <a href="https://www.smartkarma.com/entities/mtr-corp" target="_blank" data-smartkarma-citation="entities:13289:1" rel="noopener">MTR Corp (66 HK)</a> has not moved and lagged behind other transport operators in Asia.</li>
<li>High-Frequency numbers from the company has shown improvement and signs that the Chinese tourists are gradually returning.</li>
<li>The reopening of the checking in facility in downtown Hong Kong is another sign that more tourists are expected to come. </li>
</ul>


The share price of MTR Corp (66 HK) has not moved and lagged behind other transport operators in Asia.
High-Frequency numbers from the company has shown improvement and signs that the Chinese tourists are gradually returning.
The reopening of the checking in facility in downtown Hong Kong is another sign that more tourists are expected to come. 


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): 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): 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 Intl (178 HK): Revival Well on Track

Market expectation for FY23/24 earnings of Sa Sa is too conservative. Strong 1H profits and rebounding sales indicate growth potential. Lower rent...

Osbert Tang, CFA

MTR (66): Should Start to Move

MTR share price has not moved up although the statistics have improved tremendously. This is probably a good buying opportunity although it may be...

Henry Soediarko

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

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): 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 Intl (178 HK): Revival Well on Track

​Market expectation for FY23/24 earnings of Sa Sa is too conservative. Strong 1H profits and rebounding sales indicate growth potential. Lower rent...

Osbert Tang, CFA

MTR (66): Should Start to Move

MTR share price has not moved up although the statistics have improved tremendously. This is probably a good buying opportunity although it may be...

Henry Soediarko

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

Market expectation for FY23/24 earnings of Sa Sa is too conservative. Strong 1H profits and rebounding sales indicate growth potential. Lower rent...