HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

<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> has an encouraging 4Q FY 26, supporting a massive net profit surge. We expect its 3-year EPS CAGR to be 10.1%. </li>
<li>Improved store efficiency and stronger tourist arrivals have led to a revival in sales. The strength of Rmb against the HKD is another positive factor.</li>
<li>With ROE of 16-18%, against -5.1% in the last 5 years, the stock's 1.8x P/B is very cheap relative to the historical range of 1.4-6.1x.</li>
</ul>



Sa Sa International Hldgs (178 HK) has an encouraging 4Q FY 26, supporting a massive net profit surge. We expect its 3-year EPS CAGR to be 10.1%. 
Improved store efficiency and stronger tourist arrivals have led to a revival in sales. The strength of Rmb against the HKD is another positive factor.
With ROE of 16-18%, against -5.1% in the last 5 years, the stock's 1.8x P/B is very cheap relative to the historical range of 1.4-6.1x.


Sa Sa Intl (178 HK): Seeing a Clear Revival

<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

<ul>
<li>Despite missing market consensus, <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 FY24 result still have silver linings. Its resumption of dividends with a 70% payout ratio is welcoming.</li>
<li>Tax credit in 2H23 has distorted comparison. At pre-tax level, 2H24 profit has gone up by 29.5%. Cost management is solid, generating a 0.9pp FY24 operating margin expansion. </li>
<li>While overall 1Q25 sales have dropped, mainland China sales surged 83.9%. The macro environment should have bottomed and government efforts to attract tourists will pay off.  </li>
</ul>


Despite missing market consensus, Sa Sa International Hldgs (178 HK)'s FY24 result still have silver linings. Its resumption of dividends with a 70% payout ratio is welcoming.
Tax credit in 2H23 has distorted comparison. At pre-tax level, 2H24 profit has gone up by 29.5%. Cost management is solid, generating a 0.9pp FY24 operating margin expansion. 
While overall 1Q25 sales have dropped, mainland China sales surged 83.9%. The macro environment should have bottomed and government efforts to attract tourists will pay off.  


Sa Sa Intl (178 HK): Every Coin Has Two Sides

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): Seeing a Clear Revival

Sa Sa sees a massive net profit surge in FY26, with improved store efficiency and stronger tourist arrivals. Its 1.8x P/B is cheap compared to the...

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 Intl (178 HK): Every Coin Has Two Sides

During the first 5 days of the Golden Week, over 980,000 mainland visitors arrived in Hong Kong, up 35% YoY. Macau's growth was 19% YoY. Stronger...

Osbert Tang, CFA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Sa Sa Intl (178 HK): Seeing a Clear Revival

​Sa Sa sees a massive net profit surge in FY26, with improved store efficiency and stronger tourist arrivals. Its 1.8x P/B is cheap compared to the...

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 Intl (178 HK): Every Coin Has Two Sides

During the first 5 days of the Golden Week, over 980,000 mainland visitors arrived in Hong Kong, up 35% YoY. Macau's growth was 19% YoY. Stronger...

Osbert Tang, CFA

Sa Sa sees a massive net profit surge in FY26, with improved store efficiency and stronger tourist arrivals. Its 1.8x P/B is cheap compared to the...

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...