DBS: Lifestyle International Holdings Ltd – Profit Warning!
alanyeo
<News Alert> Lifestyle – Profit Warning
Lifestyle released a Profit Warning and expected HK$450m attributable loss for 1H22 (1H21: HK$220m attributable profit), based on preliminary review of financial accounts.
Key reasons being (1) weakened consumer sentiment and lowered store traffic due to impacts of the 5th wave Covid-19 outbreak in 1Q21, resulting in a revenue decline; and (2) an expected net investment loss (vs. investment gain a year ago), which we believe should be largely tied to impairment loss on debt securities (e.g., Evergrande bonds).
Nevertheless, we estimate 1H22 core earnings to remain in the black, running in line with expectations. Luxuries and cosmetics segments should also outperform other product categories in 1H22, especially by Apr 2022 upon this year’s launch of Government Consumption Vouchers (Phase I).
Sequential improvement should likely be seen; impending Government Consumption Vouchers (Phase II) that will be rolled-out in Aug 2022 should also help lifting performance.
Lifestyle is expected to announce its interim results on 28 July 2022.
On a mega low base, with sound medium-term prospects, we maintain BUY. TP to be reviewed upon results release.
