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Market seems to be suggesting that FY24 profit will come in at around HK$600-700m, which will put current p/e at around 6-7, and yield at around 5.5-7%. Assuming that the weak gold jewellery sales trend for first half continues into the second half of the year -- and latest July PRC retail sales data seems to suggest so -- this is not an unrealistic scenario.
There is also the cash burning LGD startup, which based on the results available so far, does not look likely to achieve profitability soon (if at all).
The gold hedging losses (or gains) should not be a cause for worry/concern (or elation), as as losses (or gains) in one period will more or less be offset in the long-term. As gold price has been rising since the start of the year, it only makes sense that they experience hedging loss. These losses will be offset when they sell gold to customers at a higher price (assuming that they don't absorb the gold price increase), or when gold price comes down in the second half of the year.
So current market price is indeed cheap based on p/b. But the market will only re-rate if profit/dividends recover meaningfully. So whether the company can recover and continue to grow in 2025, 2026, and beyond, is the key.
CTF revealed in its latest results that, for the first time in many years, its number of outlets has reduced. So this might be good for industry players' long-term sustainability as they reduce the ramp up of outlet expansion over the year to better match demand.
All in all, current price still looks like a great bet on Chinese gold jewellery retailing. But there’s also a lot of good hk/prc stocks with similar quality, valuation and yields.
There is also the cash burning LGD startup, which based on the results available so far, does not look likely to achieve profitability soon (if at all).
The gold hedging losses (or gains) should not be a cause for worry/concern (or elation), as as losses (or gains) in one period will more or less be offset in the long-term. As gold price has been rising since the start of the year, it only makes sense that they experience hedging loss. These losses will be offset when they sell gold to customers at a higher price (assuming that they don't absorb the gold price increase), or when gold price comes down in the second half of the year.
So current market price is indeed cheap based on p/b. But the market will only re-rate if profit/dividends recover meaningfully. So whether the company can recover and continue to grow in 2025, 2026, and beyond, is the key.
CTF revealed in its latest results that, for the first time in many years, its number of outlets has reduced. So this might be good for industry players' long-term sustainability as they reduce the ramp up of outlet expansion over the year to better match demand.
All in all, current price still looks like a great bet on Chinese gold jewellery retailing. But there’s also a lot of good hk/prc stocks with similar quality, valuation and yields.