Luk Fook (0590)

Luk Fook's sales for the golden week was not as bad as thought. I bought some shares at 22 HKD when it plunged 4.3% on Friday. Hope I'm not catching a falling knife.

http://www.aastocks.com/tc/stocks/analys...90/0/all/1

LUK FOOK HOLD (00590.HK) announced that the same store sales growth (SSSG) of Hong Kong & Macau and Mainland China was 3% and 28% during the National Day Golden Week. This was due to the relatively low international gold price recently, leading to a high demand for gold products. Although the operation of some regional outlets was affected under "Occupy Central" movement in Hong Kong, the negative impact was reduced by the substantial increase of sales in the shops in other regions since the customers shifted their shopping venue.

"Luk Fook’s store network skews more towards the non-tourist areas than peers."

Nomura

0330 GMT [Dow Jones] Shares of Chow Tai Fook (1929.HK) and Luk Fook Holdings (0590.HK) gain in morning trading after both report better-than-expected jewelry sales during Golden Week, in spite of pro-democracy protests in Hong Kong. “We believe both have seen the green shoots of recovery,” says Nomura. Chow Tai Fook’s “faster-than-expected strategic shift (from HK to China; from gold to non-gold; from high-ticket size to lower ones) should help it to position it for the recovery and future growth,” the bank says. As for Luk Fook, “results were better than our expectation, with Hong Kong and Macau +3% notwithstanding the protests,” says Bank of Communications. “We attribute it partly to the fact that Luk Fook’s store network skews more towards the non-tourist areas than peers.” Chow Tai Fook shares gain 1.3% to HK$10.58, while Luk Fook is up 0.2% to HK$22.80. (gregor.hunter@wsj.com; Twitter: @gregorhunter)

# Shops HK

Q1 2013 40 (June 30)
Q2 2013 42 (Sep 30)

Q1 2014 44 (June 30)
Q2 2014 46 (Sep 30)

Chow Tai Fook may close branches or reduce total shop areas in HK
http://www.thestandard.com.hk/news_detai...con_type=1

Luk Fook to Expand Jewelry Stores as Landlords Slow Rent Demands
http://www.bloomberg.com/news/2014-08-26...mands.html

Luk Fook sets sights on stronger wholesale business
http://hongkongbusiness.hk/retail/more-n...oZu47.dpuf

HK Retail Sales September 2014

Jewelry +2.7%

http://gia.info.gov.hk/general/201411/03...136698.pdf

Month...2013 vs 2012 / 2014 vs 2013 / -> 2014 vs. 2012

Jan.......+12.7%.......+10.6%.........-> +24.6%
Feb.......+30.5%........-0.5%.........-> +29.8%
Mar.......+11.2%........-8.9%.........-> +1.3%
Apr.......+68.4%.......-39.9%.........-> +1.2%
May.......+34.5%.......-24.5%.........-> +1.5%
Jun.......+42.5%.......-28.2%.........-> +2.3%
Jul.......+28.2%.......-22.2%.........-> -0.3%
Aug.......+19.9%........-6.1%.........-> +12.6%
Sep........+5.6%........+2.7%.........-> +8.4%
Oct.......+10.7%
Nov........+8.6%
Dec........+9.1%

China Retail Sales October 2014

Jewelry +11.7%

http://www.stats.gov.cn/tjsj/zxfb/201411...37141.html

Month 2013 vs 2012 / 2014 vs 2013 / -> 2014 vs. 2012
Jan+Feb +14.7% +9.3% -> +25.3%
Mar xxx -6.1%
Apr +72.2% -30.0% -> +20.5%
May +38.4% -12.1% -> +21.6%
Jun +30.2% -0.2% -> +29.9%
Jul +41.7% -11.7% -> +25.1%
Aug +21.8% +7.3% -> +30.7%
Sep +18.2% +11.4% -> +31.7%
Oct +14.0% +11.7% => +27.3%
Nov +14.8%
Dec +16.6%

EPS 1.37 !

http://www.hkexnews.hk/listedco/listcone...126278.pdf

And Luk Fook surprised again. Earnings per share decreased only by 16.5%, while the Chow Tai Fook's earnings decreased by 23%.

This in the context that Luk Fook was by far the biggest profiteer during the gold rush last year with a revenue increase of 70% (Chow Tai Fook 48%) and expectation was, that Luk Fook would have had to give back most.

Revenue decreased by only 25.1% after last year's 70% increase.
Thus, compared with 2012, revenue increased by 27%, another significant gain of market share.

3 dollars appear to possible for the year - again.

(26-11-2014, 05:01 PM)bmann025 Wrote: EPS 1.37 !

http://www.hkexnews.hk/listedco/listcone...126278.pdf

And Luk Fook surprised again. Earnings per share decreased only by 16.5%, while the Chow Tai Fook's earnings decreased by 23%.

This in the context that Luk Fook was by far the biggest profiteer during the gold rush last year with a revenue increase of 70% (Chow Tai Fook 48%) and expectation was, that Luk Fook would have had to give back most.

Revenue decreased by only 25.1% after last year's 70% increase.
Thus, compared with 2012, revenue increased by 27%, another significant gain of market share.

3 dollars appear to possible for the year - again.

I think you meant HK$30 and not $3 for the share price! Yes I agree. EPS for $3, yes that too.PE only 8.5 and ROE of 20% which is high for a net cash biz. Result was sparkling with improvements in net and GM. Expect 2nd half to be better as the new acquisition starts to kick in. CTK is no match in performance.

(26-11-2014, 05:01 PM)bmann025 Wrote: Revenue decreased by only 25.1% after last year's 70% increase.
Thus, compared with 2012, revenue increased by 27%, another significant gain of market share.

3 dollars appear to possible for the year - again.

Seems very weird to base market share gain on percentage gain. If comparing with 2012, Luk Fook's sales increased by 1.6bn while Chow Tai Fook's sales increased by 3.8bn. So it seems that Chow Tai Fook is gaining market share more..

And btw, in Chow Tai Fook's latest filing, it said:

To cope with the ever-changing consumer preferences and retail environment in Mainland China, we have started to optimise our inventory management mechanism. Previously, inventory ownership would be transferred to franchisees, and the amount would be recorded as our wholesale revenue upon inventory delivery to franchisees. Under the optimised mechanism, inventories are dispatched to franchised POS upon the receipt of deposits at value equivalent to the prescribed inventory level. We would retain inventory ownership until sales transactions are completed with retail customers, upon which wholesale revenue is recognised at the prevailing price...

In both Luk Fook's and Chow Tai Fook's annual report, both have similar language for revenue recognition, i.e. revenue is recognised when inventory is delivered to wholesalers. That is until Chow Tai Fook announced the above.

Just wondering,

1. Is Luk Fook's going to change its revenue recognition policy too?
2. If assuming that there was no inventory return policy for the franchisees/wholesalers to begin with, does this mean that Chow Tai Fook is offering to take on inventory risk? Effectively, this makes it really attractive to sign on as a Chow Tai Fook franchisee/wholesaler. Chow Tai Fook is really going all out for market share.

Given the change in accounting policy, I won't be surprised if Luk Fook "outperforms" again in 2H.

(not vested in both)