HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/sa-sa-international-holdings-limited" target="_blank" data-smartkarma-citation="entities:20143:1" rel="noopener">Sa Sa (178 HK)</a>'s positive profit alert suggests net profit will reach HK$150m in 1H FY26/27, equaling a 2x YoY increase, ahead of the consensus. </li>
<li>2H net profit has been historically better than 1H, meaning the market's full-year forecast of HK$277m provides room for an upgrade. The Jul retail sales trend also supports this.</li>
<li>Despite a 106% YTD rally, its 2.7x 12-month P/B is only slightly above average. With an ROE of 21-24% and net cash of HK$0.16, valuations remain not stretched.</li>
</ul>



Sa Sa (178 HK)'s positive profit alert suggests net profit will reach HK$150m in 1H FY26/27, equaling a 2x YoY increase, ahead of the consensus. 
2H net profit has been historically better than 1H, meaning the market's full-year forecast of HK$277m provides room for an upgrade. The Jul retail sales trend also supports this.
Despite a 106% YTD rally, its 2.7x 12-month P/B is only slightly above average. With an ROE of 21-24% and net cash of HK$0.16, valuations remain not stretched.


<ul>
<li>
<a href="https://www.smartkarma.com/entities/lung-fung-group-holdings-limited" target="_blank" data-smartkarma-citation="entities:46142:1" rel="noopener">Lung Fung Group (2290 HK)</a> is still 37.3% below its IPO price, despite a sharp rebound following its better-than-expected FY26 results. </li>
<li>Its same-store sales have consistently outperformed, and the start for 1Q FY27 appears encouraging. With an ROE of 72.7% for FY27, its 1.9x P/B is undemanding. </li>
<li>At a 4.8x FY27F PER and a 12.6% dividend yield, the stock is extremely cheap and trades at a steep discount to its HK-listed peers. </li>
</ul>



Lung Fung Group (2290 HK) is still 37.3% below its IPO price, despite a sharp rebound following its better-than-expected FY26 results. 
Its same-store sales have consistently outperformed, and the start for 1Q FY27 appears encouraging. With an ROE of 72.7% for FY27, its 1.9x P/B is undemanding. 
At a 4.8x FY27F PER and a 12.6% dividend yield, the stock is extremely cheap and trades at a steep discount to its HK-listed peers. 


Lung Fung Group (2290 HK): Still Looks Undervalued

<ul>
<li>
<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 1H FY25/26 profit came in at the top-end of the guidance. Its 3Q sales growth has so far increased 11.3%, a further acceleration.</li>
<li>Hong Kong and Macau should capture some of the diverted traffic as Sino-Japanese relations soured, while a weaker USD, as rates are cut, should make shopping cheaper.</li>
<li>With its ROE reaching 10-13% in FY26-28F (the best ones since FY21), its 5-year-low P/B multiple makes the stock a bargain.</li>
</ul>



Sa Sa International Hldgs (178 HK)'s 1H FY25/26 profit came in at the top-end of the guidance. Its 3Q sales growth has so far increased 11.3%, a further acceleration.
Hong Kong and Macau should capture some of the diverted traffic as Sino-Japanese relations soured, while a weaker USD, as rates are cut, should make shopping cheaper.
With its ROE reaching 10-13% in FY26-28F (the best ones since FY21), its 5-year-low P/B multiple makes the stock a bargain.


Sa Sa Intl (178 HK): Positive Trend Beyond the Results

<ul>
<li>
<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 1.63x P/B is near-trough level, but the recovery in earnings in FY26 (+56.4%) and improving industry figures suggest earnings have bottomed. </li>
<li>Its 2Q FY26 turnover grew 8.4%, accelerating from 4.7% in 1Q and -9.7% in FY25. The 1H turnover equals 49.3% of FY26F (vs. 47.2% historically). We see upgrade potential.</li>
<li>With net cash amounting to 19.3% of the share price, its 15.9x and 12.4x PERs for FY26F and FY27F do not look stretched.</li>
</ul>



Sa Sa International Hldgs (178 HK)'s 1.63x P/B is near-trough level, but the recovery in earnings in FY26 (+56.4%) and improving industry figures suggest earnings have bottomed. 
Its 2Q FY26 turnover grew 8.4%, accelerating from 4.7% in 1Q and -9.7% in FY25. The 1H turnover equals 49.3% of FY26F (vs. 47.2% historically). We see upgrade potential.
With net cash amounting to 19.3% of the share price, its 15.9x and 12.4x PERs for FY26F and FY27F do not look stretched.


Sa Sa Intl (178 HK): Seemingly Too Conservative

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

Hong Kong

Sa Sa International Holdings Limited is a leading beauty product retailing group in Asia, engaged in the retail and wholesale of cosmetic products. The company offers a wide range of skincare, fragrance, make-up, body care, hair care, inner beauty, personal care, health and fitness products, and beauty equipment through its retail stores and e-commerce platforms. Sa Sa was founded in 1978 and is headquartered in Chai Wan, Hong Kong.

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Sa Sa (178 HK)

Sa Sa Intl (178 HK): On the Run

Sa Sa recorded encouraging sales for 2Q FY27 (Jun-Sep 2026), with offline sales in HK and Macao growing 52% YoY. Including overseas markets, growth...

Osbert Tang, CFA

Lung Fung Group (2290 HK): Still Looks Undervalued

Lung Fung announced that its retail sales revenue increased 21.2% in 1Q FY27, while same-store sales grew 10.3%. This is solid momentum, suggesting...

Osbert Tang, CFA

Sa Sa Intl (178 HK): Positive Trend Beyond the Results

Sa Sa's strong 1H FY25/26 profit and 3Q sales growth, combined with favourable market conditions, make it a bargain with a healthy dividend yield....

Osbert Tang, CFA

Sa Sa Intl (178 HK): Seemingly Too Conservative

Sa Sa issued a positive profit alert, saying that 1H FY25/26 net profit will reach HK$48.5-50.5m, a 50-56% YoY growth. This is driven by a rise in...

Osbert Tang, CFA

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

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Sa Sa Intl (178 HK): On the Run

Sa Sa recorded encouraging sales for 2Q FY27 (Jun-Sep 2026), with offline sales in HK and Macao growing 52% YoY. Including overseas markets, growth...

Osbert Tang, CFA

Lung Fung Group (2290 HK): Still Looks Undervalued

Lung Fung announced that its retail sales revenue increased 21.2% in 1Q FY27, while same-store sales grew 10.3%. This is solid momentum, suggesting...

Osbert Tang, CFA

Sa Sa Intl (178 HK): Positive Trend Beyond the Results

​Sa Sa's strong 1H FY25/26 profit and 3Q sales growth, combined with favourable market conditions, make it a bargain with a healthy dividend yield....

Osbert Tang, CFA

Sa Sa Intl (178 HK): Seemingly Too Conservative

Sa Sa issued a positive profit alert, saying that 1H FY25/26 net profit will reach HK$48.5-50.5m, a 50-56% YoY growth. This is driven by a rise in...

Osbert Tang, CFA

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

Sa Sa's strong 1H FY25/26 profit and 3Q sales growth, combined with favourable market conditions, make it a bargain with a healthy dividend yield....

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...