Chow Sang Sang (0116.HK)

[karlmarx]

Whether a stock is undervalued or not is always a function of the company's future performance.

Hence, a stock which trades several SDs away from its average p/b (or whichever valuation metric) may or may not be an indication of over or undervaluation.

To cite CSS, it does not necessarily follow its p/b of 0.6 will somehow 'magically' return to its average of say, 1.1-1.5. The factors which caused CSS to be priced at p/b of 0.6 will need to be reversed, or perhaps supplanted by other more positive factors, for the p/b to return to the average.

If CSS is mismanaged, or if gold is no longer seen to be a valuable commodity, then its current valuation may be considered expensive. There are a lot more events which can cause CSS to be worth less (or more) in the future, than in the present.

And so investors have to determine whether future events will be positive or negative for any asset they are prospecting.

[karlmarx]

CSS took a HK$450m impairment on their loans to margin accounts, for their securities broking business. This is almost half of their total loans to margin accounts.

I'm not sure if they are doing this to manage their profits/dividends, or they actually provided margin facilities for (a lot of) stocks which went bust.

Without the impairment, CSS' FY19 results would have been similar to its FY18 results. Given the HK protests and trade war that occurred during FY19, the results are considerably satisfactory.

https://www1.hkexnews.hk/listedco/listco...600874.pdf

[money]

CSS took a HK$450m impairment on their loans to margin accounts, for their securities broking business. This is almost half of their total loans to margin accounts.

I'm not sure if they are doing this to manage their profits/dividends, or they actually provided margin facilities for (a lot of) stocks which went bust.

Without the impairment, CSS' FY19 results would have been similar to its FY18 results. Given the HK protests and trade war that occurred during FY19, the results are considerably satisfactory.

https://www1.hkexnews.hk/listedco/listco...600874.pdf

The stock market did reasonably well from jul 2019 to dec 2019, so if there's any impairment to margin accounts, it is hard to understand.

[jaco]

The stock market did reasonably well from jul 2019 to dec 2019, so if there's any impairment to margin accounts, it is hard to understand.

An asset is 'tested' for impairment by the accountant working on the reporting. If I am correct, the accountant must incorporate all he/she knows about the asset in the calculation of the impairment loss. So, also events happening after the reporting period, like the recent market crash, affect the impairment loss calculation.

That being said, it's still hard to understand that a broker would not liquidate the clients' positions sooner.

[karlmarx]

One year has passed, and, as expected, CSS did not report better numbers.

However, there are a few points which may offer consolation to shareholders:
i) a higher dividend is proposed,
ii) they have decided to close their brokerage business,
iii) they have begun selling their shares of the highly-priced HKEX,
iv) they are planning for an aggressive store expansion.

So it looks like they are positioning to be more focused in their core business, in China.

This year will likely produce better performance compated to 2020. But until international (or mainland) tourists return to HK -- which could take a year or longer -- it is not likely that there will be a breakthrough in earnings. So there is probably still more waiting before the stock trades at/above book value.

In another few years, as Chinese income continue to grow, contribution from the mainland segment should dwarf the HK segment.

[karlmarx]

Sticking to my knitting of the old and more predictable, CSS looks set to report growth for the past half year, if its results are in line with its competitors.

Assuming that the Chinese per capita consumption will grow well into the future, and assuming that gold and gem jewellery will continue to be in demand, and that CSS will maintain or improve its value proposition as a luxury jewellery provider (behind leaders CTF and LFX), CSS still looks like a cheap and safe bet for modest returns.

LF:
https://www1.hkexnews.hk/listedco/listco...500843.pdf
https://www1.hkexnews.hk/listedco/listco...500778.pdf

CTF:
https://www1.hkexnews.hk/listedco/listco...300285.pdf
https://www1.hkexnews.hk/listedco/listco...200677.pdf

[dreamybear]

I am surprised by the resilience of the revenue during the "covid year" of 2020. In fact, THG also displayed strong results.

Reading about the gloom and doom in the retail sector on the media, and not to mention the various countries govt putting together help packages, I had thought it wld be a dark winter for the economies as well as companies, e.g. store closures, people staying home as much as possible, delay in marriages, job losses, reduced earnings, economic uncertainty etc, I had thought we wld be looking at a 40%-50% drop in revenue.

Given how the company has fared in one of the worst crisis, I wld think it's an investment worth holding on to, especially if one was able to pick it up during last year's deep correction.

[karlmarx]

There are some types of retailing that are more resilient that others. Luxury is one and food is another.

And both have done well even as other brick and mortar are closing because part of what they sell, and which e-commerce cannot replace, is intangible; physical interaction and experience. You want to be surrounded by all the bling, pampered by the sales staff, and try on all the nice jewellery.

What makes luxury (or jewellery in particular) and food retailing enduring business concepts is that both appeal to the needs of the human nature/psyche. So there will always be an evergreen demand for such services, you just have to be doing it right.

But non-franchising retailers like CSS will grow more slowly because of the high capital needs of inventory. And apart from its branding, there is very little in product differentiation between itself and its competitors. So a lot of its success will depend on its continued ability to market itself.

[AQ.]

Hi Karlmarx and dreamybear.

Do u guys know of any valuebuddies or investingnote-like forums/apps for HK stocks?

Currently I only find aastocks useful but there's a lack of interaction with other users.

Chinese language will be fine also.

[dreamybear]

Hi Karlmarx and dreamybear.

Do u guys know of any valuebuddies or investingnote-like forums/apps for HK stocks?

Currently I only find aastocks useful but there's a lack of interaction with other users.

Chinese language will be fine also.

maybe finance.sina.com.cn / www.jrj.com.cn ? I am also trying to find forums in English.

I guess if you are fluent in Mandarin, perhaps searching via Chinese type of channels like baidu / sohu may help ?