Luk Fook (0590)

[LLI]

7x PE now, anyone find it interesting?

[Tiggerbee]

The gold and jewelry industry is facing very strong head winds in a China. Plunging gold prices in bear market territory plus plunging jewelry sales due to anti corruption and frugality trend. It's gonna get tougher for this industry and if I wanna invest in this industry, I will go for the strongest player like Chow Tai Fook, and only when the stock drops close to or below book value. Not sure if Luk Fook hedges it's gold costs but Chow Tai Fook does so.

[bmann025]

7x PE now, anyone find it interesting?

It is my #1 retail stock.

The long term uptrend in jewelry consumption is still valid despite fluctuations. The main reason for short term events is over consumption during the gold rush in 2013, but even with that, there was a 20% increase in April sales in China versus 2012 and steady sales in April HK versus 2012. And Look Fook certainly outperformed the markets again.

The influence of gold price had been grossly overrated in the past. We now know, that Lik Fook did very well during increasing prices, but exceptionally well during falling prices. People tend to but jewelry for a certain money and not weight budget.

Another point to consider is that Luk Fook had increased the number of stores in HK from 37 (as of 3/2013) to 45 (as of 3/2014), some of them in prime locations. SSS reduction may then be partly blamed on additional stores in the neighbourhood, and total revenue may still have increased or at least again gained market share, perhaps even beaten Chow Tai Fook again.


There is also much more growth potential for them in China than for Chow Tai Fook.

Yes, Luk Fook generated only 24% of income in Mainland China, but the remaining 76% are HK and Macau combined, and Macau has grown into a really decent business itself and is rather uncorrelated with HK current saturation.

HK alone probably generates about 62% of income. Mainkand tourists in HK account for 60% of these 62%, which makes only 37% of incomes, another recently overrated figure.

This is still a long term growth story, with particularly attractive features, such as low impact of cost increases, almost no inventory problems (as jewelry does not age or if can just be recycled), and finally, these businesses can afford a 100% dividend payout, once they have finished expansion (see Pranda in Thailand).

Danny Wong will now lead their 50% acquisition 3D Gold, what a great job for the crown prince, showing their commitment towards success.

It is rather amazing how this stock fluctuated under short term influences despite the long term picture remained totally intact and has actually been improving with market share gains year after year.

[bmann025]

Chart:

Good chance for a turnaround. Recent trends lasted about 6 months, so the downtrend may now be finished.

HK retail sales did no longer pressure. Short selling is low.

Watch first for a break of the last 8 weeks short term trend.

Break of the 2 year uptrend reverses that view, except a brief dive to close last July's gap around 18.5

https://assets.wallstreet-online.de/_med...g?env=live

[CityFarmer]

Chart:

Good chance for a turnaround. Recent trends lasted about 6 months, so the downtrend may now be finished.

HK retail sales did no longer pressure. Short selling is low.

Watch first for a break of the last 8 weeks short term trend.

Break of the 2 year uptrend reverses that view, except a brief dive to close last July's gap around 18.5

https://assets.wallstreet-online.de/_med...g?env=live

Please refrain from TA post. This is a value investing forum. Your other post is the prefered one.

A reminder from moderator

Regards
Moderator

[LLI]

Anyone knows why it is trading lower than Chow Sang Sang?
All I can think of is the franchise model vs the "own everything" model

[Tiggerbee]

Anyone knows why it is trading lower than Chow Sang Sang?
All I can think of is the franchise model vs the "own everything" model

How did you arrive at 6X PE? TTM EPS is 2.15 HKD and PE should only be 9.2X, which is not far off from CSS' 10.7 PE.


《大行報告》瑞信降六福(00590.HK)目標價至24.6元 評級「中性」
2014-04-16 10:08:31

瑞信表示，六福(00590.HK) 第四季同店銷售增長(SSSG)為負10%，港澳市場SSSG為負12%，內地為負1%，差過周大福第四季的同店銷售增長。

受較高基數效應之影響，加上第四季金價按年跌21%，黃金產品之SSSG為負15%。珠寶首飾的SSSG為負2%，較第三季略為收窄。

該行預料，六福2015財年上半年的SSSG將繼續惡化。相應下調2014-15財年盈測2%至5%，目標價由27元降至24.6元，評級維持「中性」。六福受惠內地市場復甦的程度，為行業中最低，因內地市場只佔集團銷售約21%。加上其依賴黃金產品銷售，相信在未來的季度，六福的SSSG跌幅，為同業中最差。

[LLI]

http://www.bloomberg.com/quote/590:HK
I think it is based on last year earnings

Anyone knows why it is trading lower than Chow Sang Sang?
All I can think of is the franchise model vs the "own everything" model

How did you arrive at 6X PE? TTM EPS is 2.15 HKD and PE should only be 9.2X, which is not far off from CSS' 10.7 PE.


《大行報告》瑞信降六福(00590.HK)目標價至24.6元 評級「中性」
2014-04-16 10:08:31

瑞信表示，六福(00590.HK) 第四季同店銷售增長(SSSG)為負10%，港澳市場SSSG為負12%，內地為負1%，差過周大福第四季的同店銷售增長。

受較高基數效應之影響，加上第四季金價按年跌21%，黃金產品之SSSG為負15%。珠寶首飾的SSSG為負2%，較第三季略為收窄。

該行預料，六福2015財年上半年的SSSG將繼續惡化。相應下調2014-15財年盈測2%至5%，目標價由27元降至24.6元，評級維持「中性」。六福受惠內地市場復甦的程度，為行業中最低，因內地市場只佔集團銷售約21%。加上其依賴黃金產品銷售，相信在未來的季度，六福的SSSG跌幅，為同業中最差。

[bmann025]

[quote='LLI' pid='85601' dateline='1402282382']
Anyone knows why it is trading lower than Chow Sang Sang?
All I can think of is the franchise model vs the "own everything" model

How did you arrive at 6X PE? TTM EPS is 2.15 HKD and PE should only be 9.2X, which is not far off from CSS' 10.7 PE.

-----------------------------------

2013 EPS was 2.15,

EPS TTM is 2.84. See hkexnews or

http://markets.ft.com/research/Markets/T...eStatement

(press interim data)

[bmann025]

[quote='LLI' pid='85601' dateline='1402282382']
《大行報告》瑞信降六福(00590.HK)目標價至24.6元 評級「中性」
2014-04-16 10:08:31

瑞信表示，六福(00590.HK) 第四季同店銷售增長(SSSG)為負10%，港澳市場SSSG為負12%，內地為負1%，差過周大福第四季的同店銷售增長。

受較高基數效應之影響，加上第四季金價按年跌21%，黃金產品之SSSG為負15%。珠寶首飾的SSSG為負2%，較第三季略為收窄。

該行預料，六福2015財年上半年的SSSG將繼續惡化。相應下調2014-15財年盈測2%至5%，目標價由27元降至24.6元，評級維持「中性」。六福受惠內地市場復甦的程度，為行業中最低，因內地市場只佔集團銷售約21%。加上其依賴黃金產品銷售，相信在未來的季度，六福的SSSG跌幅，為同業中最差。

That Credit Suisse Analysis lacks that Luk Fook increased the number of HK stores from 37 (as of 3/2013) to 45 (as of 3/2014), some of them in prime locations. SSS reduction may then be partly blamed on additional stores in the neighbourhood.

For evalution of Q1 (April-June) 2014 it has to be reminded that Luk Fook profited much more from the gold rush than anyone else. SSS Q1 2013 increased in HK/Macau by 83% and China by 117%.
http://www.hkexnews.hk/listedco/listcone...716161.pdf

Therefore it would be totally expectable that LF SSS will decrease most in Q1 2014, BUT the baseline without this one time event would be the comparison between 2014 and 2012. And here I would expect LF to perform very well with another substantial increase in market share.