Excerpts from latest analyst reports...
KINGSTON: ‘Booming‘ retail sales in Hong Kong helping CHOW SANG SANG
Kingston Securities Ltd said that Hong Kong’s strong retail sales industry and ‘tourist/shoppers’ from Mainland China are giving a big boost to jewelry retailer Chow Sang Sang (HK: 116).
Chow Sang Sang recorded a net profit of HK$496m in the first half of 2011, up 67% y-o-y.
“The retail sales industry in Hong Kong has been booming continuously, mainly benefiting from mainland tourists and the appreciation of renmenbi. The Group’s jewelry retail in Hong Kong and Macau accounted for 61% of the total and out of this percentage 47% came from Mainlanders,” Kingston said.
Turnover in the first half rose 58% to HK$8.28bn.
Kingston’s buy-in price for Chow Sang Sang is HK$25, the target price is HK$30 and the stop loss is HK$23.65.
“However, the Group expects a surge of 20% to 25% in rent prices, which may add pressure to the Group’s gross profit.
“Gold is seen as a tool to against inflation, thus consumers still look forward to the rise in gold prices, making gold products a major profit driver of the group during the period,” Kingston added.
For the wholesale market for precious metals, a surge in demand for gold at the wholesale level drove turnover up by 65%.
The group will invest HK$150m in business development in the second half of the year, including new stores opening, and planned to raise the fund through bank financing.
Chow Sang Sang expects to achieve its target of opening 50 stores in China this year and 30 new stores will be opened in the second half of 2011.
“Most of them are located in 1-tier cities like Guangzhou and Tianjin, enhancing the region’s market shares.”
See also: CHOW SANG SANG, FOCUS MEDIA: Jewelry, Ads Show Recession-Resistant Results
BOCOM: OVERPERFORM call for China’s INTERNET SECTOR
Bocom International said it is maintaining its ‘overperform’ call for China’s Internet sector.
“We maintain Tencent (HK: 700) and NetEase (Nasdaq: NTES) as our top picks, due to the former’s steady growth and openness strategy and the latter’s strong brand name. Changyou also performs well on the release of its new game - DMD.”
Bocom said August figures showed that Tencent games had a stronger impact during the school summer holiday.
“DNF/Cross Fire had the biggest increases (6%/7%) among all old MMO games on the list. New games LoL and DMD from Tencent and Changyou, respectively, continued to grow (up 23%/39%, ranked in top 10). PerfectWorld’s Legend of Martial Arts jumped into the Top 25 for the first time.”
Search volumes up 20% “Major operators’ strong pipelines in 3Q are the key driver of search increase (ie: LoL/DMD/YuanZheng ol/SUN2). Changyou had lower index than other MMO companies due to increased search volumes driven by DMD, and market cap/search index had similar trend to last month.”
Tencent recently activated its mobile phone software download platform.
“Tencent said it has activated the mobile phone software download platform at the Tencent Application Center in Beijing. The platform is similar to Apple’s APP shop. Tencent said the application center will not charge any download fee at the moment and will mainly rely on advertising revenue,” Bocom added.
Tencent’s long-term strategy should be considered in the development of application shops and profit is not its short-term target.
See also: YANGZIJIANG, PRC INTERNET STOCKS, CHINA FLOORING: What Analysts Now Say...